nep-law New Economics Papers
on Law and Economics
Issue of 2020‒12‒21
thirteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Effects of Early Childhood Exposure to Pollution on Crime: Evidence from 1970 Clean Air Act By Divya Sadana
  2. Parents, Neighbors and Youth Crime By Díaz, Carlos; Patacchini, Eleonora
  3. Artificial Intelligence and Market Manipulations: Ex-ante Evaluation in the Regulator's Arsenal By Nathalie de Marcellis-Warin; Frédéric Marty; Eva Thelisson; Thierry Warin
  4. Judicial Independence and Development: Evidence from Pakistan By Sultan Mehmood
  5. Internal Deadlines, Drug Approvals, and Safety Problems By Lauren Cohen; Umit Gurun; Danielle Li
  6. Small Claims By World Bank
  7. Political representation and the right of recall: A proposal By Ernesto Screpanti
  8. Immigration Enforcement and Infant Health By Amuedo-Dorantes, Catalina; Churchill, Brandyn F.; Song, Yang
  9. Wages, Hires, and Labor Market Concentration By Ioana Marinescu; Ivan Ouss; Louis-Daniel Pape
  10. Consumer Credit With Over-Optimistic Borrowers By Florian Exler; Igor Livshits; James MacGee; Michèle Tertilt
  11. Illicit trade and infectious diseases By Beverelli, Cosimo; Ticku, Rohit
  12. How labor market institutions affect technological choices By Samwer, Julia; Chen, Chinchih
  13. Promise, Trust and Betrayal: Costs of Breaching an Implicit Contract By Levy, Daniel; Young, Andrew

  1. By: Divya Sadana
    Abstract: Past literature has shown that 1970 amendments to the Clean Air Act (CAA) led to significant reduction in air pollution early 1970s, and that it had positive infant health consequences for the cohorts treated by CAA. Because effects of in-utero and early childhood conditions are persistent, and the health effects can remain latent for years, CAA may impact the future adult outcomes. In this paper, I investigate the impact of the CAA on the future crime. In a difference-in-differences framework, I find that the cohorts that were born in the year of the CAAâs first implementation commit fewer crimes 15 to 24 years later. The magnitude of this impact is about 4 percent. Property crimes rather than violent crimes are impacted. I also estimate that CAA reduced the ambient air pollution by 14 percent. These reduced form estimates suggest that a one percent reduction in air pollution reduces future crime rate by 0.3 percent.
    JEL: I15 I25 J24 K42 Q53
    Date: 2020–12–06
  2. By: Díaz, Carlos (Catholic University of Uruguay); Patacchini, Eleonora (Cornell University)
    Abstract: We study the interplay between parental and peer socialization in shaping criminal behavior among adolescents. We develop a simple cultural transmission model where parents affect how society influences their children's decisions. The model predicts that parental and peer socialization are substitutes in the development of juvenile crime. We then take the model to the data using information on a representative sample of adolescents in the United States. Using the geographical distances be- tween residential addresses of individuals in the same grade and school to measure peer influences, we find that negative peer effects on juvenile crime are significantly lower for teenagers with engaged mothers. Consistently with the prediction of our model, this evidence reveals an important role of parents in mediating the impact of neighborhoods on youth crime. The influence of parents is especially important for drug trafficking, assault and battery.
    Keywords: neighborhood peer effects, juvenile delinquency, parental involvement
    JEL: J13 K42 R11 R23 Z13
    Date: 2020–11
  3. By: Nathalie de Marcellis-Warin; Frédéric Marty; Eva Thelisson; Thierry Warin
    Abstract: The digital economy's development poses questions unprecedented in their magnitude in potential market manipulations and manipulations of consumer choices. Deceptive and unfair strategies in consumer law may coexist and mutually reinforce each other with infringements in the field of competition, whether it be algorithmic collusion or abuse of a dominant position. Faced with the difficulty of detecting and sanctioning these practices ex-post, questions are raised about the sanction's dissuasive effect and its capacity to prevent possibly irreversible damage. To this end, this article considers the available supervision tools for the authorities in charge of market surveillance, the consumers or the stakeholders of the companies concerned.
    Keywords: Algorithmic Manipulation,Deceptive Practices,Unfair Practices,Algorithmic Surveillance,
    JEL: D18 K21 L86
    Date: 2020–12–04
  4. By: Sultan Mehmood (Aix-Marseille Univ, CNRS, AMSE, Marseille, France.)
    Abstract: This paper provides plausibly causal evidence that Presidential appointment of judges considerably impacts judicial independence and decision quality in Pakistan. We find that when the judge selection procedure changed from Presidential appointment to appointment by peer judges, rulings in favor of the government decreased significantly and the quality of judicial decisions improved. The age structure of judges at the time of the reform and the mandatory retirement age law provide us with an exogenous source of variation in the implementation of the reform. We test for and provide evidence against potential threats to identification and alternative explanations for our findings. The analysis of mechanisms reveals that our results are explained by rulings in politically salient cases and by "patronage" judges who hold political office prior to their appointments. According to our estimates, judicial appointment by peer judges prevents land expropriations worth 0.14 percent of GDP every year.
    Keywords: president, judges, property rights, patronage
    JEL: D02 O17 K40
    Date: 2020–12
  5. By: Lauren Cohen; Umit Gurun; Danielle Li
    Abstract: Absent explicit quotas, incentives, reporting, or fiscal year-end motives, drug approvals around the world surge in December, at month-ends, and before respective major national holidays. Drugs approved before these informal deadlines are associated with significantly more adverse effects, including more hospitalizations, life-threatening incidents, and deaths – particularly, drugs most rushed through the approval process. These patterns are consistent with a model in which regulators rush to meet internal production benchmarks associated with salient calendar periods: this “desk-clearing” behavior results in more lax review, leading both to increased output and increased safety issues at particular—and predictable—periodicities over the year.
    JEL: I18 K32 O38 P16
    Date: 2020–11
  6. By: World Bank
    Keywords: Law and Development - Contract Law Law and Development - Judicial System Reform Law and Development - Law and Justice Institutions
    Date: 2020–05
  7. By: Ernesto Screpanti
    Abstract: In a representative democracy, members of parliament should be accountable to the voters who elected them. For this to be actually the case, the latter require an instrument of deterrence, a mechanism of control over opportunistic representatives, for example the right to recall them at any moment. However, two obstacles, one ideological and one practical, hinder legal recognition of this right. The first is due to the doctrine by which members of parliament legislate in the public interest, and therefore should not be constrained by a mandate binding them to their particular voters. The second consists in the fact that voting secrecy hinders the identification of which voters elected any one member of parliament. In this article, leveraging the potential offered by modern Information and Communication Technologies (ICT), I propose a model for an electoral system that dissolves the first problem and resolves the second. According to my model, electoral platforms constitute the formal instructions by which members of parliament are held accountable, and an electronic vote makes it possible to associate each member of parliament with his or her voters while still guaranteeing voting secrecy. Voters are then able to participate in a process of deliberation about the decisions made by their representative and may revoke their mandate if the representative fails to comply with it.
    Keywords: Election law, civil law, e-democracy, right of recall
    JEL: K15 K16 K38
    Date: 2020–12
  8. By: Amuedo-Dorantes, Catalina (University of California, Merced); Churchill, Brandyn F. (Vanderbilt University); Song, Yang (Colgate University)
    Abstract: The past two decades have been characterized by an unprecedented increase in interior immigration enforcement and heightened stress due to fears of family separation and loss of income among undocumented immigrants. Using vital statistics on infant births from the National Center of Health Statistics for the 2003 through 2016 period and a difference-in-differences design, we compare the health outcomes of infants with likely undocumented mothers before and after the intensification of immigration enforcement within U.S. counties. We find that intensified enforcement, especially during the third trimester, increases the likelihood of low birth weight (
    Keywords: immigration enforcement, undocumented immigrants, infant health
    JEL: I10 I12 K37
    Date: 2020–11
  9. By: Ioana Marinescu; Ivan Ouss; Louis-Daniel Pape
    Abstract: How does employer market power affect workers? We compute the concentration of new hires by occupation and commuting zone in France using linked employer-employee data. Using instrumental variables with worker and firm fixed effects, we find that a 10% increase in labor market concentration decreases hires by 12.4% and the wages of new hires by nearly 0.9%, as hypothesized by monopsony theory. Based on a simple merger simulation, we find that a merger between the top two employers in the retail industry would be most damaging, with about 24 million euros in annual lost wages for new hires, and an 8000 decrease in annual hires.
    JEL: J23 J3 J42 K21 L13
    Date: 2020–11
  10. By: Florian Exler; Igor Livshits; James MacGee; Michèle Tertilt
    Abstract: There is active debate over whether borrowers’ cognitive biases create a need for regulation to limit the misuse of credit. To tackle this question, we incorporate overoptimistic borrowers into an incomplete markets model with consumer bankruptcy. Lenders price loans, forming beliefs—type scores—about borrowers’ types. Since over-optimistic borrowers face worse income risk but incorrectly believe they are rational, both types behave identically. This gives rise to a tractable theory of type scoring as lenders cannot screen borrower types. Since rationals default less often, the partial pooling of borrowers generates cross-subsidization whereby overoptimists face lower than actuarially fair interest rates. Over-optimists make financial mistakes: they borrow too much and default too late. We calibrate the model to the US and quantitatively evaluate several policies to address these frictions: reducing the cost of default, increasing borrowing costs, imposing debt limits, and providing financial literacy education. While some policies lower debt and filings, they do not reduce overborrowing. Financial literacy education can eliminate financial mistakes, but it also reduces behavioral borrowers’ welfare by ending crosssubsidization. Score-dependent borrowing limits can reduce financial mistakes but lower welfare.
    Keywords: Consumer Credit, Over-Optimism, Financial Mistakes, Bankruptcy, Financial Literacy, Financial Regulation, Type Score, Cross-Subsidization
    JEL: E21 E49 G18 K35
    Date: 2020–11
  11. By: Beverelli, Cosimo; Ticku, Rohit
    Abstract: We collect a novel dataset that covers about 130 countries and the six four-digit live animal categories in the Harmonized System (HS) over a sixteen-year period, to study the link between illicit trade in live animals and threat to animal health from infectious diseases. Our results imply that a one percent increase in illicit imports in an HS four-digit live animal category is associated with a 0.3 to 0.4 percent rise in infections amongst related species in the importing country. We explore the mechanisms and find that mis-classifying or under-pricing an imported species are the channels through which illicit trade impacts animal health.
    Keywords: illicit trade,missing imports,disease,live animals
    JEL: F14 F18 I18 K42 Q57
    Date: 2020
  12. By: Samwer, Julia; Chen, Chinchih
    Abstract: Does the adoption of technological change depend on labor market institutions? The disparities in technology adoption across countries are enormous and are a major factor in explaining poverty. The returns to introducing new technology differ across countries since they depend not only on skill-levels but also on incentives provided by labor market institutions. Wage compression through unions and minimum wage laws indirectly induce investment into technology. The employer is incenitivized to increase the productivity of employees and he can claim the full extra rent. The magnitude of the technological advancement also defines adoption rates. Small and cheaper technical changes are adopted in any institutional environment whereas larger technical progress is more likely to be integrated in rigid institutional settings. Using data on industrial robots and information and communication technology an empirical cross-country analysis explores the impact of institutional labor market patterns on technological choices and hence their influence on wage patterns, unemployment and inequality trends. It is shown that countries with strong individual labor protection adapt new technologies at higher rates, while at the same time the existence of strong unions and collective labor rights has a counter-effect.
    Keywords: Technology Adoption,Labor market Institutions,Robot intensity
    JEL: O33 K31 P48
    Date: 2020
  13. By: Levy, Daniel; Young, Andrew
    Abstract: We study the cost of breaching an implicit contract in a goods market. Young and Levy (2014) document an implicit contract between the Coca-Cola Company and its consumers. This implicit contract included a promise of constant quality. We offer two types of evidence of the costs of breach. First, we document a case in 1930 when the Coca-Cola Company chose to avoid quality adjustment by incurring a permanently higher marginal cost of production, instead of a one-time increase in the fixed cost. Second, we explore the consequences of the company’s 1985 introduction of “New Coke” to replace the original beverage. Using the Hirschman’s (1970) model of Exit, Voice, and Loyalty, we argue that the public outcry that followed New Coke’s introduction was a response to the implicit contract breach.
    Keywords: Invisible Handshake; Implicit Contract; Customer Market; Long-Term Relationship; Cost of Breaching a Contract; Cost of Breaking a Contract; Coca-Cola; New Coke; Exit Voice and Loyalty; Nickel Coke; Sticky Prices; Rigid Prices; Price Stickiness; Price Rigidity; Cost of Price Adjustment; Menu Cost; Cost of Quality Adjustment
    JEL: E31 K10 L11 L16 L66 M20 M30 N80 N82
    Date: 2020–11–25

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