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on Law and Economics |
| By: | Yu Aoki; Theodore Koutmeridis |
| Abstract: | We study criminal incentives exploiting the devastating shock of the 1995 Kobe earthquake. Evidence shows that the earthquake decreased burglaries but left other crime types unaffected. The effect stays significant even after controlling for unemployment, policing and income. We corroborate this by instrumenting damages with the distance from the earthquake epicentre. These findings survive various robustness checks under different specifications. The evidence is consistent with a simple theory of crime, value and specialization. We conclude that burglars respond to damages that devaluate their prospective takings. Yet, they cannot shift their specialization and substitute burglaries with other crime types |
| Keywords: | crime, burglary, value, housing damage, specialization |
| JEL: | K42 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:gla:glaewp:2019-13&r=all |
| By: | Francesco Decarolis (Bocconi University, IGIER); Raymond Fisman (Boston University); Paolo Pinotti (Bocconi University, BAFFI-CAREFIN); Silvia Vannutelli (Boston University) |
| Abstract: | The benefits of bureaucratic discretion depend on the extent to which it is used for public benefit versus exploited for private gain. We study the relationship between discretion and corruption in Italian government procurement auctions, using a confidential database of firms and procurement officials investigated for corruption by Italian enforcement authorities. Based on a regression discontinuity design around thresholds for discretion, we find that, overall, a large increase in the use of discretionary procedures in the 2000s led to a minimal increase in auctions won by investigated firms. To understand this ‘non-result,’ we further investigate the attributes of “corrupted†auctions. We show that discretionary procedure auctions are associated with corruption only when conducted with fewer than the formally required number of bidders; similarly, discretionary criteria (“scoring rule†rather than first price) auctions are won more often by investigated firms. We further show that these “corruptible†discretionary auctions are chosen more often by officials who are themselves investigated for corruption, but less often in procurement administrations in which at least one official is investigated for corruption. These findings fit with a framework in which more discretion leads to greater efficiency as well as more opportunities for theft, and a central monitor manages this trade-off by limiting discretion for high-corruption procedures and locales. Additional results based on two standard tools for curbing corruption – turnover and subcontracting limits – corroborate this interpretation. Overall, our results imply that discretion is under-utilized, given the high potential benefits as compared to the modest increment in corruption. |
| Keywords: | Corruption, Procurement, Bureaucracy, Competition, Bribes |
| JEL: | C73 D72 D73 K42 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:bos:iedwpr:dp-344&r=all |
| By: | Makofske, Matthew |
| Abstract: | A moving-violation traffic stop is pretextual when it is motivated by suspicion of an unrelated crime. Despite concerns that they infringe on civil liberties and enable discrimination against minority motorists; evidence on the use, frequency, and nature of pretextual stops is mostly anecdotal. Using nearly a decade's worth of traffic citation data from Louisville, KY, I find evidence suggesting that pretextual stops predicated on a particular moving violation—failure to signal—were relatively frequent. Compared to stops involving other similarly common moving violations, where arrest rates range from 0.01 to 0.09, stops involving failure-to-signal yield an arrest rate of 0.42. More importantly, pretext to stop a vehicle requires only one traffic violation. In stops involving failure-to-signal, the arrest rate is 0.52 when no other traffic violations are cited, and the presence of other traffic violations yields a 55% relative decrease in the probability of arrest. Relative to conventional traffic stops, black and Hispanic motorists account for a disproportionate share of likely pretextual stops. Yet, within likely pretextual stops, they are arrested at a significantly lower rate than other motorists. Following departmental adoption of body-worn cameras (body cams) I find that the arrest rate in likely pretextual stops increases 33-34%, and the racial disparity in the arrest rate becomes much smaller and statistically insignificant. |
| Keywords: | pretextual traffic stop, racial bias, law enforcement |
| JEL: | J15 K42 |
| Date: | 2020–05–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:100792&r=all |
| By: | Gorecki, Paul |
| Abstract: | The acquisition by Berendsen Ireland Limited of Kings Laundry Limited should have been prohibited by the Competition and Consumer Protection Commission, Ireland’s competition agency. Instead the agency cleared the merger subject to the divestment of three of Berendsen’s healthcare contracts. The Commission makes a compelling case for a finding that in the outsourced supply of flat linen rental and maintenance services to healthcare customers that the three to two merger would lead to a substantial lessening of competition. The divestment of Kings Laundry healthcare operations, an appropriate remedy to restore competition, was not feasible. The divestment of three healthcare contracts does not mitigate the anticompetitive effect of the merger: for customers that are the counterparties to the three contracts, the remedy will result in decline in the number of healthcare suppliers from three pre merger to two post merger. Neither of these two providers is likely to be an especially vigorous competitor. For all other healthcare customers, although the number of healthcare suppliers remains unchanged at three - pre and post merger, the evidence suggests that the purchaser of the three contracts is unlikely to replicate Kings Laundry as a significant competitive force in healthcare. The failure to implement the remedy within the nine month window deemed appropriate by the European Commission in its Remedies Notice raises concerns that Kings Laundry as a competitive force will become, in European Commission parlance, “degraded.” |
| Keywords: | mergers; structural remedies; substantial lessening of competition; and, Competition Act 2002. |
| JEL: | D22 D44 K21 L41 |
| Date: | 2020–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:100477&r=all |
| By: | Erica Bosio; Simeon Djankov; Edward L. Glaeser; Andrei Shleifer |
| Abstract: | We examine a new data set of laws and practices governing public procurement, as well as procurement outcomes, in 187 countries. We measure regulation as restrictions on discretion of the procuring agents. We find that laws and practices are highly correlated with each other across countries, better practices are correlated with better outcomes, but laws themselves are not correlated with outcomes. To shed light on this puzzle, we present a model of procurement in which both regulation and public sector capacity determine the efficiency of procurement. In the model, regulation is effective in countries with low public sector capacity, and detrimental in countries with high public sector capacity because it inhibits the socially optimal exercise of discretion. We find evidence broadly consistent with this prediction: regulation of procurement improves outcomes, but only in countries with low public sector capacity. |
| JEL: | D73 H11 H57 K42 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27188&r=all |
| By: | Jens-Uwe Franck; Dimitrios Linardatos |
| Abstract: | As of January 2020, Section 58a of the German Payment Services Supervisory Act (PSSA) provides a right for payment service providers and e-money issuers to access technical infrastructure that contributes to mobile and internet-based payment services. This right of access is intended to promote technological innovation and competition in the consumers’ interests in having a wide choice among payment services, including competing solutions for mobile and internet-based payments. The provision has been dubbed ‘Lex Apple Pay’ as it seems to have been saliently motivated by the objective to give payment service providers the right of direct access to the NFC interfaces of Apple’s mobile devices. In enacting Section 58a PSSA, the German legislature has rushed forwards, overtaking the EU Commission’s ongoing competition investigation into Apple Pay as well as the pending reform of the German Competition Act, which is aimed precisely at operators of technological platforms, which enjoy a gatekeeper position. This article explores the scope of application and the statutory requirements of this right of access as well as available defences and possible legal barriers. We point out that, to restore a level playing field in the internal market, the natural option would be to further harmonize EU payment services regulation, including the availability of a right of access to technical infrastructure for mobile and internet-based payment services and e-money issuers. |
| Keywords: | ‘Lex Apple Pay’; Technology platforms; Antitrust; Payment Services Regulation; Mobile Payment; Access to NFC interfaces; Wallet Apps; Internal Market Regulation |
| JEL: | K21 K22 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2020_173&r=all |
| By: | Dong, Xiaoge; Voigt, Stefan |
| Abstract: | This paper shows that courts are not only a crucial part of the rule of law in the conventional sense but that they can also serve an important function in revealing information regarding the performance of lower level governments to the central government, and thereby improve their performance. After having developed a general argument in that vein, the recent reforms to the Chinese court system are partially interpreted as an attempt to make the courts monitoring agents of the central government. Based on primary data from more than 1,000 Chinese local courts, the argument is tested empirically and its hypotheses are largely confirmed. |
| Keywords: | Court system of China,court reforms,courts-as-information-providers,courts as monitoring agents |
| JEL: | H11 H77 K40 N45 P21 P37 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ilewps:35&r=all |
| By: | Libor Dusek (Charles University, Faculty of Law, and University of Economics, Prague); Nicolas Pardo (Hertie School, Berlin); Christian Traxler (Hertie School, Berlin; Max Planck Institute for Research on Collective Goods; CESifo) |
| Abstract: | This paper studies the enforcement of fines. We randomly assign 80,000 speeding tickets to treatments that increase the salience of the payment deadline, late penalties, or both. Stressing the penalties significantly and persistently increases payment rates. Emphasizing only the deadline is not effective. The findings from the RCT are consistent with a survey experiment which documents the treatments' impact on priors about parameters of the compliance problem. Exploiting discontinuous variation in fines, we then document a strong price responsiveness: a 1% increase in the payment obligation induces a 0.23 percentage point decrease in timely compliance. This semi-elasticity suggests that the impact of the salience nudges is equivalent to the effect of a 4-9% reduction in fines. |
| Keywords: | Enforcement, fines, timely compliance, salience, nudges, deadlines, perceptions, RCT, RDD |
| JEL: | K42 H26 D80 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2020_09&r=all |
| By: | Kanaya, Shin; Taylor, Luke |
| Abstract: | Abstract We estimate the likelihood of miscarriages of justice by reframing the problem in the context of misclassified binary choice models. The estimator is based on new nonparametric identification results, for which we provide methods to empirically test the key identifying assumptions and alternative identification schemes for when these checks fail. Blacks are found to have both a higher probability of conviction when innocent and a higher probability of acquittal when guilty, relative to whites. We go on to show that this seemingly contradictory result is, in fact, consistent with a model where both police and judges discriminate against blacks. |
| Keywords: | Miscarriages of justice; Nonparametric identification; misclassification |
| JEL: | C14 C25 K14 K41 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:100217&r=all |
| By: | Ennis, Sean; Ivaldi, Marc; Lagos, Vicente |
| Abstract: | This paper examines the impact of most favored nation (MFN) clauses on retail prices, taking advantage of two natural experiments that changed vertical contracting between hotels and major digital platforms. The broad E.U. intervention narrowed the breadth of “price parity” obligations between hotels and major Online Travel Agencies (OTAs). Direct sales by hotels to customers subsequently became relatively cheaper. Comparisons with hotel pricing outside the E.U. confirm the reduction in prices for mid-level and luxury hotels. France and Germany went further and eliminated all price-parity agreements. This stronger intervention was associated solely with a significant additional price-reducing effect for mid-level hotels in Germany. Overall, wide MFNs are associated with higher retail prices. Regulating MFNs reduced prices with primary effects coming either from the narrow price-parity intervention or, perhaps, from direct sales becoming cheaper than OTAs in both E.U. and non-E.U. countries, and, interestingly, not from complete elimination of MFNs. |
| Keywords: | Price Parity Clause (PPC); Most favored nation (MFN); Most favored customer (MFC); Hotel Industry; Impact Evaluation; Online Travel Agency (OTA); digital platforms |
| JEL: | K21 L14 L42 L81 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:124308&r=all |
| By: | Alessandro De Chiara; Marco A. Schwarz |
| Abstract: | Firms have incentives to influence regulators' decisions. In a dynamic setting, we show that a firm may prefer to capture regulators through the promise of a lucrative future job opportunity (i.e., the revolving-door channel) than through a hidden payment (i.e., a bribe). This is because the revolving door publicly signals the firm's eagerness and commitment to reward friendly regulators, which facilitates collusive equilibria. Moreover, the revolving-door channel need not require an explicit agreement between the firm and the regulator, but may work implicitly giving rise to an industry norm. This renders ineffective standard anti-corruption practices, such as whistle-blowing protection policies. We highlight that closing the revolving door may give rise to other inefficiencies. Moreover, we show that cooling-off periods may make all players worse off if timed wrongly. Opening the revolving door conditional on the regulator's report may increase social welfare. |
| Keywords: | collusion, corruption, dynamic games, experts, regulation, regulatory capture, revolving door |
| JEL: | D82 J45 K23 L14 L51 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2020-12&r=all |
| By: | Massimo Motta; Martin Peitz |
| Abstract: | Big tech mergers are frequently occurring events. What are the competitive effects of these mergers? With the help of a simple model we identify the acquisition of potential competitors as a pressing issue for merger control in digital industries. We also sketch a few novel theories of harm of horizontal and conglomerate mergers that are potentially relevant in digital industries. Finally, we draw some policy recommendations on how to deal with mergers in such industries. |
| Keywords: | merger policy, digital markets, potential competition, conglomerate mergers |
| JEL: | L41 L13 K21 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2020_147v1&r=all |
| By: | Valerio Sterzi; Jean-Paul Rameshkoumar; Johannes Van Der Pol |
| Abstract: | Non-practising entities (NPEs) file or buy patents from a variety of sources and employ them primarily to obtain license fees by asserting them against accused infringers, without any intention of using the invention they protect. This report gives unique insight into how NPEs game Europe’s patent system for profit. The report also provides further evidence that the problem of NPEs is migrating to Europe from the US, and it proposes policy responses to increase patent ownership transparency. The report is largely based on forensic original research into two cases. These cases point to a serious lack of transparency in patent and corporate ownership. They demonstrate how shell or dormant companies, often of unknown ownership and commonly established in the UK, are used to acquire European patents, and how these companies exploit those patents in courts in the European Union – especially Germany. The report also shows that due to the lack of transparency of patent ownership, the problem of NPEs gaming the system is almost certainly far worse than the report states. |
| Keywords: | Non-practicing entities; Patent trolls; Patent litigation; Patent ownership transparency |
| JEL: | O31 O34 D23 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:grt:bdxewp:2020-10&r=all |
| By: | Felix Hugger |
| Abstract: | Within the framework of the OECD BEPS initiative many countries introduced nonpublic country-by-country reporting for MNEs above a revenue threshold. The reports provide tax authorities with information on the global activities of multinationals at a country level. This paper investigates the responses of companies to country-bycountry reporting and tests whether the goal of a reduction in tax avoidance is achieved. Difference-in-difference estimations show an increase in consolidated effective tax rates of about one percentage point in the treatment group and provide evidence for a reduction in profit shifting at the subsidiary level. Responses are more pronounced for companies experiencing a stronger increase in detection probability. At the same time, total tax payments do not rise, which may be explained by a decrease in economic activity of companies in scope. The second part of the paper investigates avoidance of the disclosure obligation and documents substantial excess mass just below the revenue threshold in the post-reform years. This effect is stronger for company types with higher costs of CbCR and lower costs of adjusting revenues. |
| Keywords: | Corporate tax avoidance, multinational firms, country-by-country reporting, disclosure regulation |
| JEL: | F23 H26 K34 M48 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ifowps:_2020)&r=all |
| By: | Fasani, Francesco; Frattini, Tommaso; Minale, Luigi |
| Abstract: | This article investigates the medium to long-term effects on refugee labour market outcomes of the temporary employment bans being imposed in many countries on recently arrived asylum seekers. Using a newly collected dataset covering almost 30 years of employment restrictions together with individual data for refugees entering European countries between 1985 and 2012, our empirical strategy exploits the geographical and temporal variation in employment bans generated by staggered introduction and removal coupled with frequent changes at the intensive margin. We find that exposure to a ban at arrival reduces refugee employment probability in post-ban years by 15%, an impact driven primarily by lower labour market participation. These effects are not mechanical, since we exclude refugees who may still be subject to employment restrictions, are non-linear in ban length, confirming that the very first months following arrival play a key role in shaping integration prospects, and last up to 10 years post arrival. We further demonstrate that the detrimental effects of employment bans are concentrated among less educated refugees, translate into lower occupational quality, and seem not to be driven by selective migration. Our causal estimates are robust to several identification tests accounting for the potential endogeneity of employment ban policies, including placebo analysis of non-refugee migrants and an instrumental variable strategy. To illustrate the costs of these employment restrictions, we estimate a EUR 37.6 billion output loss from the bans imposed on asylum seekers who arrived in Europe during the so-called 2015 refugee crisis. |
| Keywords: | asylum policies; asylum seekers; economic assimilation |
| JEL: | F22 J61 K37 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14765&r=all |
| By: | Konstantinos Ioannidis (University of Amsterdam); Theo Offerman (University of Amsterdam); Randolph Sloof (University of Amsterdam) |
| Abstract: | The Verifiability Approach is a lie detection method based on the insight that truth-tellers provide precise details whereas liars sometimes remain vague to avoid being exposed. We provide a-game-theoretic analysis of a speaker who wants to be acquitted and an investigator who prefers to find out the truth. The investigator can verify the speaker’s statement at some cost; verification gets more reliable the more details are provided. If, after a falsified statement, the investigator convicts, an additional obstruction penalty is imposed. We derive all the equilibria of the game and thereby the conditions under which the investigator can infer additional information from the speaker's statement at face value. Strategic information revelation by the speaker and verification by the investigator then necessarily work in tandem. Improvements in reliability result in more valuable (strategic) information transmission, whereas a harsher obstruction penalty does not as soon as a lower limit is met. |
| Keywords: | Lie detection, Verifiability approach, Strategic information revelation |
| JEL: | K14 C72 D01 D82 |
| Date: | 2020–06–06 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20200029&r=all |
| By: | James J. Feigenbaum; Soumyajit Mazumder; Cory B. Smith |
| Abstract: | How do coercive societies respond to negative economic shocks? We explore this question in the early 20th-Century United States South. Since before the nation's founding, cotton cultivation formed the politics and institutions in the South, including the development of slavery, the lack of democratic institutions, and intergroup relations between whites and blacks. We leverage the natural experiment generated by the boll weevil infestation from 1892-1922, which disrupted cotton production in the region. Panel difference-in-differences results provide evidence that Southern society became less violent and repressive in response to this shock with fewer lynchings and less Confederate monument construction. Cross-sectional results leveraging spatial variation in the infestation and historical cotton specialization show that affected counties had less KKK activity, higher non-white voter registration, and were less likely to experience contentious politics in the form of protests during the 1960s. To assess mechanisms, we show that the reductions in coercion were responses to African American out-migration. Even in a context of antidemocratic institutions, ordinary people can retain political power through the ability to ``vote with their feet.'' |
| JEL: | J15 K0 N3 N5 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27161&r=all |