nep-law New Economics Papers
on Law and Economics
Issue of 2020‒11‒23
eight papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Effects of the COVID-19 Pandemic on Domestic Violence in Los Angeles By Miller, Amalia; Segal, Carmit; Spencer, Melissa K.
  2. Corruption and the Regulation of Innovation By Alessandro De Chiara; Ester Manna
  3. Anticorruption efforts and corporate fraud By Zou, Na
  4. A Vicious Cycle of Regional Unemployment and Crime? - Evidence from German Counties By Umbach, Tim
  5. Will You Marry Me, Later? Age-of-Marriage Laws and Child Marriage in Mexico By Cristina Bellés-Obrero; María Lombardi
  6. Does the Fundamental Transformation Deter Trade? An Experiment By Christoph Engel; Eric Helland
  7. Trade Unions and Corporate Social Responsibility By Goerke, Laszlo
  8. Twelve Years after the Financial Crisis – Too-big-to-fail is still with us. Comments on the Financial Stability Board’s Consultation Report ‘Evaluation of the Effects of Too-big-to-fail reforms’ By Martin F. Hellwig

  1. By: Miller, Amalia (University of Virginia); Segal, Carmit (University of Zurich); Spencer, Melissa K. (University of Virginia)
    Abstract: Around the world, policymakers and news reports have warned that domestic violence (DV) could increase as a result of the COVID-19 pandemic and the attendant restrictions on individual mobility and commercial activity. However, both anecdotal accounts and academic research have found inconsistent effects of the pandemic on DV across measures and cities. We use high-frequency, real-time data from Los Angeles on 911 calls, crime incidents, arrests, and calls to a DV hotline to study the effects of COVID-19 shutdowns on DV. We find conflicting effects within that single city and even across measures from the same source. We also find varying effects between the initial shutdown period and the one following the initial re-opening. DV calls to police and to the hotline increased during the initial shutdown, but DV crimes decreased, as did arrests for those crimes. The period following re-opening showed a continued decrease in DV crimes and arrests, as well as decreases in calls to the police and to the hotline. Our results highlight the heterogeneous effects of the pandemic across DV measures and caution against relying on a single data type or source.
    Keywords: domestic violence, COVID-19, pandemic, crime reporting, police data
    JEL: I18 J12 J16 K14 K42
    Date: 2020–11
  2. By: Alessandro De Chiara (Central European University); Ester Manna (Universitat de Barcelona)
    Abstract: We study the optimal design of regulation for innovative activities which can have negative social repercussions. We compare two alternative regimes which may provide firms with different incentives to innovate and produce: lenient authorization and strict authorization. We find that corruption plays a critical role in the choice of the authorization regime. Corruption exacerbates the costs of using lenient authorization, under which production of socially harmful goods is always authorized. In contrast, corruption can be socially beneficial under strict authorization, since it can mitigate an over-investment problem. In the second part of the paper, we explore the design of bonuses, taxes, and ex-post liability to improve the regulatory outcome.
    Keywords: Authorization, Collusion, Corruption, Extortion, Regulatory capture,Safety regulation
    JEL: D73 K42 L51
    Date: 2019
  3. By: Zou, Na
    Abstract: This study examines whether and how anticorruption efforts may mitigate the risk of corporate fraud. Based on a sample of Chinese publicly listed firms over the period of 2008 to 2017, we find that anticorruption efforts reduce the likelihood of fraud commission and increase the likelihood of detection given fraud. These effects are driven by state-owned enterprises and politically connected firms through politician board members. We also find that firms located in regions with well-developed market and legal institutions are less likely to commit fraud in the post anticorruption period. Firms increasing internal monitoring by appointing local independent directors with accounting background help to explain the reduction of fraud in these regions. This study contributes to the literature on corporate wrongdoing and the design of strategies to mitigate the risk of corporate fraud in an emerging economy context.
    Keywords: Corporate fraud,Anticorruption,Corporate governance,Firm heterogeneity,Internal monitoring
    JEL: G30 G34 K22
    Date: 2020
  4. By: Umbach, Tim
    Abstract: Much research has been done showing that unemployment can cause crime, and that crime adversely impacts economic activity. However, very few authors have considered a simultaneous relationship. Using an IV-setup and regional panel-data, I find evidence for the possibility of a vicious cycle, with unemployment leading to higher crime rates and crime rates raising unemployment. I further find that especially employment in low-skill service jobs is adversely affected by crime, that many types of crime are impacted by unemployment differently and that both apartment rents and GDP-growth decrease if crime increases. The spatial dependencies found further raise the possibility that these vicious cycles could spill over into neighboring regions.
    Keywords: Crime,Unemployment,Amenities,spatial autregresssive model,SARAR,endogenous regessors.
    JEL: J21 J32 K42 R11 R23 R30
    Date: 2020
  5. By: Cristina Bellés-Obrero; María Lombardi
    Abstract: We provide empirical evidence on the impact of raising the minimum age of marriage to 18 years old on child marriage, early motherhood, and school enrollment in Mexico. Using a difference-in-differences model that takes advantage of the staggered adoption of this reform across states, we show that banning child marriage leads to a large and statistically significant reduction in the number of registered child marriages. However, we find no effect on school attendance or early fertility rates. We provide evidence that the mechanism behind these results is the substitution of formal marriage for informal unions. These findings suggest that when informal unions are a viable option for young couples, raising the minimum age of marriage is not enough to prevent early unions and their negative consequences.
    Keywords: child marriage, marriage laws, fertility, schooling
    JEL: J12 J13 K36 I20
    Date: 2020–11
  6. By: Christoph Engel (Max Planck Institute for Research on Collective Goods); Eric Helland (Claremont McKenna College)
    Abstract: Oliver Williamson has coined the term “fundamental transformation”. It captures the following situation: before they strike a deal, buyer and seller are protected by competition. Yet thereafter they find themselves in a bilateral monopoly. With common knowledge of standard preferences, both sides conclude the contract regardless if its expected value exceeds their outside options. We run an experiment to test whether additional behavioral reasons deter mutually beneficial trade. If the risk materializes, another individual makes a windfall profit. She does so by intentionally exploiting the first individual. The first individual is let down, although she has knowingly exposed herself to this risk. Participants sell the opportunity to enter the contractual relationship at a price below its expected value. This effect is driven by risk aversion, and already present if the risk is stochastic. Behavioral effects are heterogeneous. About a quarter of participants exhibit the hypothesized additional deterrent effect.
    Keywords: fundamental transformation, bilateral monopoly, sunk cost, Oliver Williamson, windfall profit, exploitation, let down aversion
    JEL: B21 C91 D22 D43 K12 L12 L14
    Date: 2020–09
  7. By: Goerke, Laszlo
    Abstract: Trade unions distort a profit-maximising firm's input choice. The nature of the resulting inefficiency depends on whether there is wage or efficient bargaining. Moreover, trade unions redistribute income and thereby affect welfare. If firms also pursue Corporate Social Responsibility (CSR) objectives, input choices are distorted already in the absence of collective bargaining. Adopting a positive perspective, we show that CSR objectives which foster economic activity have ambiguous wage and employment consequences in case of wage negotiations and raise employment if there is efficient bargaining. Importantly from a normative vantage point, such CSR objectives make a welfare-enhancing role of trade unions more likely in the presence of wage negotiations, whereas the reverse may be true in case of efficient bargaining.
    Keywords: Corporate Social Responsibility,Efficient Bargaining,Trade Unions,Wage Bargaining,Welfare
    JEL: D60 J51 L31 M14
    Date: 2020
  8. By: Martin F. Hellwig (Max Planck Institute for Research on Collective Goods)
    Abstract: The paper contains comments made on the Financial Stability Board’s (FSB) Consultation Report concerning the success of regulatory reforms since the global financial crisis of 2007-2009. According to these comments, the FSB’s assessment of the role of equity is too narrow, being phrased in terms of bankruptcy avoidance and risk taking incentives, without attention to debt overhang creating distortions in funding choices, as well as the systemic impact of ample equity reducing deleveraging needs after losses and equity contributing to smoothing of lending and asset purchases over time. The FSB’s treatment of systemic risk pays too little attention to mutual interdependence of different parts of the system that is not well captured by linear causal relationships. Finally, the comments point out that bank resolution of systemically important institutions is still not viable, for lack of political acceptance of single-point-of-entry procedures, for lack of funding of banks in resolution (in the EI), for lack of fiscal backstops (in the EU), and for lack of political acceptance of bank resolution with bail-in.
    Keywords: Financial Stability Board, too-big-to-fail, systemic risk, banking regulation, bank resolution
    JEL: G01 G18 G21 G28 K23
    Date: 2020–10

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