nep-law New Economics Papers
on Law and Economics
Issue of 2020‒10‒05
fifteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. “This is my Rifle” - On US Police Militarisation and Crime By Roesti, Matthias
  2. The Enforcement of the Argentine Antitrust Law By Germán Coloma
  3. The Unintended Consequences of the U.S. Adversarial Model in Latin American Crime By Angela Zorro Medina; Camilo Acosta; Daniel Mejía
  4. Public Procurement in Law and Practice By Erica Bosio; Simeon Djankov; Edward Glaeser; Andrei Shleifer
  5. Unravelling the 'race to the bottom' argument: How does FDI affect different types of labour rights? By Nicole Janz; Luca Messerschmidt
  6. Crime Aggregation, Deterrence, and Witness Credibility By Harry Pei; Bruno Strulovici
  7. Crime and Mobility during the COVID-19 Lockdown: A Preliminary Empirical Exploration By Lydia Cheung; Philip Gunby
  8. Crimes Against Morality: Unintended Consequences of Criminalizing Sex Work By Lisa Cameron; Jennifer Seager; Manisha Shah
  9. Broken commitments and unfulfilled expectations: An explorative study of Swedish Labor Court cases By Stern, Charlotta; Weidenstedt, Linda
  10. Private and Public IPR Protection in a Vertically Differentiated Software Duopoly By Kresimir Zigic; Jiri Strelicky; Michal Kunin
  11. Custodial Interrogations By Alessandro Ispano; Péter Vida
  12. Income Tax Evasion: Tax Elasticity, Welfare, and Revenue By Max Gillman
  13. The Effects of Recreational Cannabis Access on the Labor Market: Evidence from Colorado By Avinandan Chakraborty; Jacqueline Doremus; Sarah Stith
  14. Do Property Rights Institutions Mitigate Drought-Induced Conflict? By Potter, Nicholas; Cook, Joseph
  15. Country selection for a comparative case study on labour law systems By Alexandre Cunha; Diana Sawyer; José Monteiro da Silva; Luca Lazzarini; Marília Rocha; Tamara Santos

  1. By: Roesti, Matthias
    Abstract: I examine the effect of local police militarisation on violent crime using evidence from the 1033-programme in the US. Exogenous cost shifters due to the particular logistics of the programme are exploited to instrument for the amount of equipment received by local law enforcement. The results do not support previous county-level studies, who find strong and consistent negative effects on crime. I show that those findings are likely based on a combination of (i) inconsistencies in the underlying data and (ii) limited comparability of different subsamples. Accounting for these factors, I find only weak evidence of a negative impact on violent crime – notably for more rural areas, which form a majority of US counties. For this subsample, the results do not support the notion that military equipment enhances the effectiveness of enforcement agencies: if anything, arrests fall while any resulting crime reduction is of negligible economic significance.
    Keywords: Police militarization, 1033-program, violent crime, police violence
    JEL: H56 H76 K42 Z18
    Date: 2020–09
  2. By: Germán Coloma
    Abstract: This paper analyzes the basic characteristics of antitrust law in Argentina, and the way in which it has been enforced in several important cases. We begin with a section that introduces the evolution of the law, followed by another section about the basic economic and legal principles underlying that law. The rest of the paper describes the enforcement of the Argentine competition statutes, in a number of cases that involve collusive practices, exclusionary practices, vertical restraints, abuses of dominance, and mergers.
    Keywords: Antitrust law, competition, Argentina
    JEL: K21 L40
    Date: 2020–09
  3. By: Angela Zorro Medina; Camilo Acosta; Daniel Mejía
    JEL: K14 K40 K42
    Date: 2020–09–10
  4. By: Erica Bosio (World Bank); Simeon Djankov (Peterson Institute for International Economics); Edward Glaeser (Harvard University); Andrei Shleifer (Harvard University)
    Abstract: In this paper we examine a new dataset of laws and practices governing public procurement, as well as procurement outcomes, in 187 countries. We measure regulation as restrictions on the discretion of the procuring agents. We find that laws and practices are highly correlated with each other across countries, and 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.
    Keywords: Procurement, Law, Practice, Corruption
    JEL: H40 H57 K42
    Date: 2020–08
  5. By: Nicole Janz (School of Politics and International Relations at the University of Nottingham); Luca Messerschmidt (Hochschule für Politik at the Technical University of Munich (TUM) and the TUM School of Governance)
    Abstract: Does foreign direct investment (FDI) lead to better or worse labour standards in developing countries? We argue that it depends on the type of labour right, and how costly it is to protect it. Governments are likely to follow international pressure and 'climb to the top' of improved labour standards, but only for those rights that do not incur direct costs to foreign investors, such as collective bargaining rights. In contrast, governments engage in a 'race to the bottom' when it comes to rights that bear immediate costs for firms, such as overtime pay. To test our argument, we use novel data to distinguish between the legal protection of (1) fair working contracts, (2) adequate working time, (3) dismissal protections, which are more costly; versus (4) collective worker representation, and (5) industrial action rights, which are relatively cheaper to grant. Our panel data analysis for 138 developing countries (1982-2010) shows that higher FDI is indeed connected to an improvement of `cheap' rights, and to a decline in `expensive' rights protection. These results remain robust across a range of model specifications.
    Keywords: Foreign direct investment; worker rights; developing countries; cash standards; outcome standards
    JEL: G38 J08 J50 J80 K31
    Date: 2020–10
  6. By: Harry Pei; Bruno Strulovici
    Abstract: We present a model for the equilibrium frequency of offenses and the informativeness of witness reports when potential offenders can commit multiple offenses and witnesses are subject to retaliation risk and idiosyncratic reporting preferences. We compare two ways of handling multiple accusations discussed in legal scholarship: (i) When convictions are based on the probability that the defendant committed at least one, unspecified offense and entail a severe punishment, potential offenders induce negative correlation in witnesses' private information, which leads to uninformative reports, information aggregation failures, and frequent offenses in equilibrium. Moreover, lowering the punishment in case of conviction can improve deterrence and the informativeness of witnesses' reports. (ii) When accusations are treated separately to adjudicate guilt and conviction entails a severe punishment, witness reports are highly informative and offenses are infrequent in equilibrium.
    Date: 2020–09
  7. By: Lydia Cheung; Philip Gunby (University of Canterbury)
    Abstract: In this research note we document the decrease in victimisation rates during the COVID-19 lockdown period in New Zealand. We show that the changes in mobility patterns in the same period are significantly correlated with these changes in crime rates. We discuss how our preliminary empirical results accord with the theories of crime in economics and criminology.
    Keywords: COVID-19; crime; mobility; lockdown
    JEL: K42 R00
    Date: 2020–08–01
  8. By: Lisa Cameron; Jennifer Seager; Manisha Shah
    Abstract: We examine the impact of criminalizing sex work, exploiting an event in which local officials unexpectedly criminalized sex work in one district in East Java, Indonesia, but not in neighboring districts. We collect data from female sex workers and their clients before and after the change. We find that criminalization increases sexually transmitted infections among female sex workers by 58 percent, measured by biological tests. This is driven by decreased condom access and use. We also find evidence that criminalization decreases earnings among women who left sex work due to criminalization, and decreases their ability to meet their children's school expenses while increasing the likelihood that children begin working to supplement household income. While criminalization has the potential to improve population STI outcomes if the market shrinks permanently, we show that five years post-criminalization the market has rebounded and the probability of STI transmission within the general population is likely to have increased.
    JEL: I18 J16 K42
    Date: 2020–09
  9. By: Stern, Charlotta (The Ratio Institute); Weidenstedt, Linda (The Ratio Institute)
    Abstract: Little is known about what lies behind serious relational conflicts in the workplace. In this paper, we analyze conflicts emanating from perceptions of broken commitments and unfulfilled expectations as they appear in the Swedish Labor Court. Sweden is a highly regulated and formalized labor market, with high levels of unionization and collective agreement coverage. Yet in a social setting ripe with formal rules and regulation such as this, what role do informal promises and expectations have? The empirical material for this study consists of a sub-set of two years of Labor Court decisions dealing with situations where mutual consent of what has been agreed upon or what is to be expected from each other has broken down. We describe who, when and what causes workplace conflicts and provide examples of typical situations where relations break down to such an extent that the cases are taken to court. The results show some variation between employers and employees, men and women, as well as insiders and outsiders of the Swedish labor market model. Our exploration into court cases in a highly regulated and formalized labor market suggests that regardless of the amount of regulations, people build relationships that go beyond formal rules. And when they interpret and judge their social relations, they will sometimes do so differently – and sometimes the differences will cause severe conflicts. Even in Sweden.
    Keywords: Industrial relations; Durkheim; implicit duties and norms; psychological contracts; Labor Court decisions; text analysis
    JEL: K12 K31 L00 L14 M54
    Date: 2020–09–25
  10. By: Kresimir Zigic; Jiri Strelicky; Michal Kunin
    Abstract: We study the interaction between public and private intellectual property rights (IPR) protection in a duopoly in which software developers offer a product variety of differing quality and compete for heterogeneous users, who have an option to buy a legal version, possibly use an illegal copy, or not buy a product at all. Illegal usage implies violation of IPR and is punishable. A developer may use private IPR protection for his software if the level of piracy is high. An important intermediate step in our analysis addresses firms’ pricing strategies and the analysis of the impact of both private and public IPR protection on these strategies (with monopoly serving as a benchmark case). Last but not least, we make some comparisons with an analogous model based on horizontal product differentiation.
    Keywords: vertically differentiated duopoly; software piracy; Bertrand competition; copyright protection; private and public intellectual property rights protection;
    JEL: D43 L11 L21 O25 O34
    Date: 2020–09
  11. By: Alessandro Ispano; Péter Vida (Université de Cergy-Pontoise, THEMA)
    Abstract: We provide a model of custodial interrogations in which the suspect is privately informed about his guilt and the likely strength of incriminating evidence and law enforcers are privately informed about the actual evidence. The evidence is directly informative about the suspect's guilt and may also disprove his eventual lies. We study how communication in the interrogation and the accuracy of prosecution deci- sions vary with the scope of protection of the suspect's right to silence, the relative costs of type I and type II errors for law enforcers and the evidence strength standard for interrogating. We also evaluate the scope for deceptive interrogation tactics when the suspect is prone to deception. Finally, we describe the optimal mechanism under full commitment over law enforcers' decisions and a natural sequential game that implements it. Our results offer important insights for the design of the legal system.
    Keywords: lie, evidence, leniency, questioning, confession, law, prosecution
    JEL: D82 D83 C72 K40
    Date: 2020
  12. By: Max Gillman (1 University Blvd; University of Missouri – St. Louis; St. Louis, MO 63121)
    Abstract: This paper provides a general equilibrium model of income tax evasion. As functions of the share of income reported, the paper contributes an analytic derivation of the tax elasticity of taxable income, the welfare cost of the tax, and government revenue as a percent of output. It shows how an increase in the tax rate causes the tax elasticity and welfare cost to increase in magnitude by more than with zero evasion. Keeping constant the ratio of income tax revenue to output, as shown to be consistent with certain US evidence, a rising productivity of the goods sector induces less evasion and thereby allows tax rate reduction. The paper derives conditions for a stable share of income tax revenue in output with dependence upon the tax elasticity of reporting income. Examples are provided with less and more productive economies in terms of the tax elasticity of reported income, the welfare cost of taxation and the tax revenue as a percent of output, with sensitivity analysis with respect to leisure preference and goods productivity. Discussion focuses on how the tax evasion analysis may help explain such fiscal tax policy as the postwar US income tax rate reductions with discussion of tax acts and government fiscal multipliers. Fiscal policy with tax evasion included shows how tax rate reduction induces less tax evasion, a lower welfare cost of taxation, and makes for a stable income tax share of output.
    Keywords: Optimal Evasion; Tax Law; Welfare; Tax Elasticity; Revenue; Productivity; Development.
    JEL: E13 H21 H26 H30 H68 K34 K42 O11
    Date: 2020–09
  13. By: Avinandan Chakraborty (Department of Economics, University of New Mexico); Jacqueline Doremus (Department of Economics, California Polytechnic State University); Sarah Stith (Department of Economics, University of New Mexico)
    Abstract: Recreational access to cannabis may have a positive effect on labor demand due to investments in growing, processing and retail cannabis facilities, and spillovers to interconnected industries such as manufacturing, and leisure and hospitality. Using county-level Colorado data from 2011-2018 and exploiting the variation in the timing of commencement of sale of dispensaries, we test for changes in the unemployment rate, employment and wages, overall as well as in manufacturing, construction, and services. Consistent with an increase in labor demand, we estimate that the sale of recreational cannabis through dispensaries is associated with a 0.7 percentage point decrease in the unemployment rate with no effect on total labor force participation. We also find a 4.5 percent increase in the overall number of employees, with effects concentrated in manufacturing and services. We do not find an effect on average weekly wages overall or by sector. Given the lack of a reduction in labor force participation or wages, negative effects on labor supply are likely limited, in line with the existing literature. The decrease in the unemployment rate, coupled with an increase in the number of employees, indicates that labor demand effects are likely to dominate. Our results suggest that policymakers considering recreational access to cannabis should account for increased employment as a possible outcome.
    Keywords: cannabis, marijuana, labor demand, manufacturing
    JEL: J21 R11 J3 K00
    Date: 2020
  14. By: Potter, Nicholas; Cook, Joseph
    Keywords: Resource/Energy Economics and Policy, Institutional and Behavioral Economics
    Date: 2020–07
  15. By: Alexandre Cunha (IPC-IG); Diana Sawyer (IPC-IG); José Monteiro da Silva (IPC-IG); Luca Lazzarini (IPC-IG); Marília Rocha (IPC-IG); Tamara Santos (IPC-IG)
    Abstract: "This brief presents the steps for grouping countries based on socio-economic, state organisation and labour law criteria based on the Grade of Membership model. It is part of a project that aims to develop a descriptive international comparative analysis of labour law systems". (...)
    Keywords: Grade of Membership model, labour law, labour market, judicial systems, fuzzy sets
    Date: 2020–03

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