nep-law New Economics Papers
on Law and Economics
Issue of 2020‒08‒31
nine papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Racial disparities in law enforcement: The role of in-group bias and electoral pressures By Amartya Bose
  2. The Effect of Medical Marijuana Legalization on Pharmaceutical Payments to Physicians By Lebesmuehlbacher, Thomas; Smith, Rhet A.
  3. Investing in Ex Ante Regulation: Evidence from Pharmaceutical Patent Examination By Michael D. Frakes; Melissa F. Wasserman
  4. Deviant or Wrong? The Effects of Norm Information on the Efficacy of Punishment By Cristina Bicchieri; Eugen Dimant; Erte Xiao
  5. Ascriptive Characteristics and Perceptions of Impropriety in the Rule of Law: Race, Gender, and Public Assessments of Whether Judges Can Be Impartial By ONO Yoshikuni; Michael A. ZILIS
  6. Commitment Decisions in the Antitrust Enforcement of Korea: A Comparative Study with the Settlement systems of the US and the EU By Dongmyong Kim
  7. Disclosure Policies in Inspection Programs: The Role of Specific Deterrence By Makofske, Matthew
  8. Has the financial regulatory environment improved in the UK? Capture-Recapture approach to estimate detection and deterrence By John Ashton; Tim Burnett; Ivan Diaz Rainey; Peter L. Ormosi
  9. The impacts of incarceration on crime By David Roodman

  1. By: Amartya Bose (School of Economics, UNSW)
    Abstract: Racial disparities are widespread throughout the U.S. justice system; in arrests and incarceration. These disparities are typically explained by appealing to racial biases among the police and the judiciary. I present a model in which disparities arise between groups in spite of unbiased actions on the part of these authorities. I assume that individuals discount the harm caused by criminal acts by members of their own group. Voters in each county determine the intensity with which legal sanctions are enforced against crimes. There are two groups, with the median voter drawn from the majority. In this model the intensity of law enforcement increases with the size of the minority. When counties are heterogeneous this leads to group disparities at the state level. The intensity of law enforcement depends on both the level of policing and the strictness of the judiciary. In some states, voters can elect their judges and increase the legal sanction through judicial severity, while in other states judges are appointed. We should therefore expect that the relationship between the size of the minority population and the intensity of policing to be stronger in counties where judges are appointed. Using a county-level panel of arrests between 2000-2014 in the United States, I find that in states with appointed judges the level of policing is increasing with the share of the black population. A 1% higher share of black population leads to a 0.58% increase in the clearance rate of property crimes. I do not find a comparable effect in states with elected judges. This agrees with the predictions of the theoretical model.
    Date: 2020–08
  2. By: Lebesmuehlbacher, Thomas; Smith, Rhet A.
    Abstract: Although cannabis is federally prohibited, a majority of U.S. states have implemented medical cannabis laws (MCLs). As more individuals consider the drug for medical treatment, they potentially substitute away from prescription drugs. Therefore, an MCL signals competitor entry. This paper exploits geographic and temporal variation in MCLs to examine the strategic response in direct-to-physician marketing by pharmaceutical firms as cannabis enters the market. We use office detailing records from 2014-2018 aggregated to the county level and find detailing increases by 7% in the quarter an MCL is proposed. The increase is temporary, however, and attenuates after MCL approval. We then incorporate physician-level cannabis recommendation data from Florida and find opioid detailing to cannabis-friendly doctors declines following MCL enactment. Although we find weak evidence of a similar decline in our primary analysis, the effects are muted at the aggregate level by the small percent of doctors that recommend cannabis.
    Keywords: Cannabis, Medical Marijuana, Prescription Drugs, Competitor Entry, Detailing
    JEL: D22 D78 I11 L21
    Date: 2020–08
  3. By: Michael D. Frakes; Melissa F. Wasserman
    Abstract: The debate surrounding escalating prescription drug prices has increasingly focused on the legitimacy of the practice of brand-name manufacturers receiving patent protection on peripheral features of the drug such as the route of administration, as opposed to just the active-ingredient itself. The key question is whether these later-obtained, secondary patents protect novel features and represent true innovation or, instead, provide little to no innovative benefit and improperly delay generic entry. In this paper, we explore how the Patent Office may improve the quality of the secondary patents issued—thereby reducing the degree of unnecessary and harmful delays of generic entry—by giving examiners more time to review patent applications. Our findings suggest that current examiner time allocations are causing patent examiners to issue low quality secondary patents on the margin. We further set forth evidence suggesting that the costs to investing in greater ex ante scrutiny of secondary pharmaceutical patent applications by the Patent Office are greatly outweighed by the benefits, which include the avoidance of downstream litigation expenses and gains to consumer and total surplus from reduced drug prices.
    JEL: I18 O34
    Date: 2020–07
  4. By: Cristina Bicchieri (University of Pennsylvania); Eugen Dimant (University of Pennsylvania; CESifo, Munich); Erte Xiao (Monash University)
    Abstract: A stream of research examining the effect of punishment on conformity indicates that punishment can backfire and lead to suboptimal social outcomes. We examine whether this effect is due to a lack of perceived legitimacy of rule enforcement, enabling agents to justify selfish behavior. We address the question of punishment legitimacy by shedding light upon the importance of social norms and their interplay with punishment. People are often presented with incomplete norm information: either about what most others do (empirical) or what most others deem appropriate (normative). We show that in isolation, neither punishment nor empirical/normative information increase prosocial behavior. In turn, we find that prosociality significantly increases when normative information and punishment are combined, but only when compliance is relatively cheap. When compliance is more expensive, we find that the combination of punishment and empirical information about others' conformity can have detrimental effects. In additional experiments, we explain how this negative effect is due, at least for some individuals, to punishment not being perceived as justified. Our results have important implications for researchers and practitioners alike.
    Keywords: Conformity, Punishment, Social Norms, Trust
    JEL: C91 D03 D73 H26
    Date: 2020–08
  5. By: ONO Yoshikuni; Michael A. ZILIS
    Abstract: Perceptions of procedural fairness influence the legitimacy of the law, and because procedures are mutable, reforming them can buttress support for the rule of law. Yet legal authorities have recently faced a distinct challenge: accusations of impropriety based on their ascriptive characteristics (e.g., gender, ethnicity). We study the effect of these traits in the context of the U.S. legal system, focusing on the conditions under which citizens perceive female and minority judges as exhibiting impropriety, and how this compares with perceptions of their white and male counterparts. We find that Americans use a judge's race and gender to make inferences about which groups the judge favors, whether she is inherently biased, and whether she should recuse. Notably, we find drastically different evaluations of female and Hispanic judges among the political right and left.
    Date: 2020–07
  6. By: Dongmyong Kim (Centre for Competition Policy, University of East Anglia)
    Abstract: Since the turn of the century, an increasing number of competition regimes have adopted ‘settlement’ or ‘commitment’ procedures in an effort to promote flexible and streamlined antitrust enforcement. Korea is one such regime to have introduced a commitment mechanism in the past decade. Yet, the first 7 years of the MRFTA regime have only given rise to 4 competition-based consent decisions. Considering the successful uptake of commitment procedures in numerous other jurisdictions and their attractiveness to both competition authorities and businesses alike, we might therefore ask why Korea’s own procedure has yet to be actively utilised. This paper conducts a comparative legal study between the commitment regime in Korea and its counterpart regimes in the United States and the European Union. Of particular note is the practical significance of a unique condition within Korea’s commitment procedure which requires an applicant to propose consumer damage relief as a remedy within their submission. The paper reviews the effect that this condition has had on utilisation of the procedure and suggests how it can operate in harmony with other aims of the consent decision mechanism in the future.
    Date: 2018–10–01
  7. By: Makofske, Matthew
    Abstract: In inspection programs, policies of disclosing inspection performance promote greater compliance via general deterrence—i.e., by increasing the expected cost of regulatory violations. Yet, despite their growing popularity as regulatory aids, an unexamined matter is how specific deterrence—deterrence that follows from receiving punishment—might influence the effectiveness of disclosure policies. In Las Vegas, Nevada, food-service health inspections are scored numerically. Using a simple grading scale, scores are then coarsened into letter grades which restaurants must prominently display. There is, however, a wrinkle to this grading scale: establishments committing the same violation in consecutive inspections are downgraded one letter. By virtue of this downgrade rule, punishment assignment varies among identically scored inspections. Relative to establishments with identical sequences of prior inspection scores, I find that restaurants are assessed 17-27% fewer demerits following a downgrade. This substantial specific deterrence effect has important implications for the design of disclosure policies; particularly, regarding the coarsening of numeric scores into letter grades.
    Keywords: disclosure, regulatory inspection, coarsening, letter grades, restaurant hygiene
    JEL: I18 K32 L15
    Date: 2020–07–18
  8. By: John Ashton (Bangor University); Tim Burnett (Warwick University); Ivan Diaz Rainey (University of Otago); Peter L. Ormosi (Centre for Competition Policy and Norwich Business School, University of East Anglia)
    Abstract: Have regulators improved their capacity to detect or deter financial misconduct since the global financial crisis? This study addresses this question through an analysis that differentiates between detection and deterrence of financial misconduct over the period 2002-2016. To make this determination a CaptureRecapture, trap response model within a difference-in-differences framework is used to examine regulatory notices and supplementary information issued by UK financial regulators with corresponding Australian data employed as an unbiased control. Examining pre- and post-financial crisis periods, we offer evidence, whilst there was no statistically significant change in detection rates for breaches of financial regulation, there was a significant increase in the rate of deterrence occurred after 2010. We interpret this result as an increase in the efficacy of regulation of financial misconduct in recent years.
    Keywords: misconduct risk, regulatory punishments, partial observability, Capture-Recapture, deterrence.
    Date: 2018–10–01
  9. By: David Roodman
    Abstract: This paper reviews the research on the impacts of incarceration on crime. Where data availability permits, reviewed studies are replicated and reanalyzed. Among three dozen studies I reviewed, I obtained or reconstructed the data and code for eight. Replication and reanalysis revealed significant methodological concerns in seven and led to major reinterpretations of four. I estimate that, at typical policy margins in the United States today, decarceration has zero net impact on crime outside of prison. That estimate is uncertain, but at least as much evidence suggests that decarceration reduces crime as increases it. The crux of the matter is that tougher sentences hardly deter crime, and that while imprisoning people temporarily stops them from committing crime outside prison walls, it also tends to increase their criminality after release. As a result, "tough-on-crime" initiatives can reduce crime in the short run but cause offsetting harm in the long run. A cost-benefit analysis finds that even under a devil's advocate reading of this evidence, in which incarceration does reduce crime in U.S., it is unlikely to increase aggregate welfare.
    Date: 2020–07

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