nep-law New Economics Papers
on Law and Economics
Issue of 2021‒04‒12
eleven papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Females in Crime By Gavrilova, Evelina
  2. Misdemeanor Prosecution By Agan, Amanda; Doleac, Jennifer; Harvey, Anna
  3. Cartel Stability in Times of Low Interest Rates By Severin Lenhard
  4. Isolating the incapacitative effect of social distancing on crime: Evidence from Ecuador’s Covid-19 lockdown By Clotilde Mahe; Sergio Parra-Cely
  5. The use of contracts for difference (‘CFD’) spread bets and binary options (‘forbin’) to trade foreign exchange (‘forex’) commodities, and stocks and shares in volatile financial markets By Barnes, Paul
  6. The Erroneous Foundations of Law and Economics By Mark Glick; Gabriel A. Lozada
  7. Direct-to-Consumer Sales by Manufacturers and Bargaining By Donna, Javier D.; Pereira, Pedro; Trindade, Andre; Yoshida, Renan C.
  8. Collusion between two-sided platforms By Yassine Lefouili; Joana Pinho
  9. Maternity Entitlements in India: Women's Rights Derailed By Drèze, Jean; Khera, Reetika; Somanchi, Anmol
  10. Litigation management process in construction industry By Marine Echternach--Jaubert; Robert Pellerin; Laurent Joblot
  11. The World Bank Doing Business Index for Canada: An Assessment By Andrew Sharpe

  1. By: Gavrilova, Evelina
    Abstract: In this paper I review the literature on gender in the economics of crime. The emerging picture is that women are increasingly involved in crime at all ages. Women are favored in the Justice process with lower probabilities of arrest, shorter sentences and lighter sentencing regimes. The possible existence of a bias means that female crime can not be curbed by the policy maker through sweeping deterrence policies that affect all criminals. Rather, the key to decreasing crime lies in the multitude of life-cycle events that impact the opportunity cost to crime. Females are successfully deterred by welfare policies, with effects driven by the subgroup of single mothers. However, given trends of decreasing fertility, the group of potential criminals responding to welfare policies is dwindling. Therefore, there is a need for more research into the incentives that deter female criminals. The purpose would be to expand the set of tools that the policy maker can use to limit rising female crime.
    Keywords: crime, female crime, deterrence policies, welfare policies
    JEL: H00 J71 K42
    Date: 2021–01–15
  2. By: Agan, Amanda (Rutgers University); Doleac, Jennifer (Texas A&M University); Harvey, Anna (New York University)
    Abstract: Communities across the United States are reconsidering the public safety benefits of prosecuting nonviolent misdemeanor offenses. So far there has been little empirical evidence to inform policy in this area. In this paper we report the first estimates of the causal effects of misdemeanor prosecution on defendants' subsequent criminal justice involvement. We leverage the as-if random assignment of nonviolent misdemeanor cases to Assistant District Attorneys (ADAs) who decide whether a case should move forward with prosecution in the Suffolk County District Attorney's Office in Massachusetts. These ADAs vary in the average leniency of their prosecution decisions. We find that, for the marginal defendant, nonprosecution of a nonviolent misdemeanor offense leads to large reductions in the likelihood of a new criminal complaint over the next two years. These local average treatment effects are largest for first-time defendants, suggesting that averting initial entry into the criminal justice system has the greatest benefits. We also present evidence that a recent policy change in Suffolk County imposing a presumption of nonprosecution for a set of nonviolent misdemeanor offenses had similar beneficial effects: the likelihood of future criminal justice involvement fell, with no apparent increase in local crime rates.
    Keywords: crime, prosecution, courts, recidivism
    JEL: K4
    Date: 2021–03
  3. By: Severin Lenhard
    Abstract: We study the interest rate’s effect on the stability of cartels. A low interest rate implies a high discount factor and thus increases cartel stability. If firms access the capital market, an additional effect comes into play: a low interest rate lowers investment costs, resulting in more profitable deviations from the collusive agreement. We propose a new measure for a cartel’s stability regarding the two opposing effects. Stability is U-shaped in the interest rate. We test our theory using a dataset of 615 firms and find supporting evidence. We conclude that the current unusually low interest rate facilitates collusion.
    Keywords: Collusion, Interest Rate, Repeated Game, Survival Analysis
    JEL: C41 D43 K21 L40
    Date: 2021–03
  4. By: Clotilde Mahe (Department of Economics and Management, Université du Luxembourg); Sergio Parra-Cely (Universidad San Francisco de Quito, Ecuador)
    Abstract: Identifying the impact of incapacitation measures on crime, such as imprisonment or curfews, is challenging since any such intervention simultaneously dissuades from engaging in illegal behaviour. We exploit Covid-19 confinement measures as a quasi-experiment to isolate incapacitative from deterrent effects of mobility restrictions in a developing country, Ecuador. Difference-in-differences and eventstudy estimates show a significant reduction in violent and property crime, relative to comparable months in pandemic-free years. While the fall in violent crime is driven by rape cases, we observe no cross-crime substitution for property crime. Heterogeneity effect analysis indicates that the composite decline in violent crime is entirely attributed to incapacitation. In contrast, the drop in property crime is attenuated in provinces where the economic activity mainly relies on essential sectors and blue-collar occupations, leaving incapacitation to explain 40 to 50% of the composite decrease.
    Keywords: Crime, Incapacitation, Deterrence Non-Pharmaceutical Interventions, Covid-19 Ecuador, Latin America.
    JEL: I18 I19 K42
    Date: 2020
  5. By: Barnes, Paul
    Abstract: This paper examines the popularity of forex and derivatives - contracts for difference (‘CFD’) spread bets and binary options - at a time when the markets are turbulent and speculating by trading is popular. The paper provides theoretical calculations of the probability of success of trading in this way together with empirical evidence. These show that it is not possible for the trader to trade profitably over the medium- to long-term as these markets are efficient and that the broker, who is the counterparty, will win just like a casino or bookie. It is also shown that these markets have become susceptible to scams and fraud but argues such actions are unnecessary for the broker as it will win as long as the trader continues to bet. Finally, it is argued that whilst forex is the most popular asset traded, its price movements are more difficult to predict and are much smaller compared with stocks and shares and commodities, making it even more difficult for traders to trade them successfully.
    Keywords: Stocks, shares, securities, contracts for difference, CFD, spread betting, binary options, forex, forbin, scam, fraud, boiler room, bucket shop.
    JEL: G2 G21 G23 G28 K2 K22 K4 K42
    Date: 2021–01–28
  6. By: Mark Glick (University of Utah); Gabriel A. Lozada (University of Utah)
    Abstract: The fundamental originating principle of law and economics (L&E) is that legal decisions should be (and are) based on maximizing efficiency. But L&E proponents do not define 'efficiency' in the way agreed to by most economists, as Pareto Efficiency. A Pareto optimal condition is obtained when no one can be made better off without making someone worse off. Pareto Improvements are win-win changes where no losers exist. In the judicial system, however, there are always winners and losers, because under Article III § 2 of the Constitution a legal case does not exist unless there is a justiciable 'case or controversy' in need of resolution. Unable to use Pareto Efficiency, L&E scholars have been forced to adopt alternative definitions of efficiency. Most L&E scholars claim to define 'efficiency' based on the work of Kaldor and Hicks, but (perhaps unwittingly) instead use a definition of 'efficiency' derived from the 19th century idea of consumer surplus, which encompasses L&E notions such as 'wealth maximization,' and 'consumer welfare' in antitrust. Neither of these alternative definitions is viable, however. Outside of L&E, the Kaldor-Hicks approach has long been recognized to be riddled with logical inconsistencies and ethical failures, and the surplus approach is even more deficient. Remarkably, virtually none of the numerous L&E textbooks even hint at such problems. Critically, all definitions of efficiency improvements in economics are biased in favor of wealthy individuals or firms, either because they are dependent on the status quo ante distribution of assets, or because they bestow large advantages on parties with political influence or who can afford to bring lawsuits quickly. Many L&E practitioners treat efficiency improvements instead as being objectively good, an error revealing that L&E is primarily motivated by its neoliberal policy agenda.
    Keywords: law and economics, antitrust economics, efficiency, wealth maximization, legal realism, neoliberal theory, Kaldor Hicks, Pareto Optimality
    JEL: K1 D61 L4
    Date: 2021–02–15
  7. By: Donna, Javier D.; Pereira, Pedro; Trindade, Andre; Yoshida, Renan C.
    Abstract: Cutting out the intermediary and selling directly to consumers is an increasingly common strategy by manufacturers in many industries. We develop a structural model of vertical relations where manufacturers both bargain with retailers over wholesale prices and sell their products directly to consumers. We show that direct sales by manufacturers generate two effects that have opposing impact on welfare. First, direct sales generate potential welfare gains to consumers downstream due to additional competition and product variety. Second, in the upstream, there is an increase in the bargaining leverage of the manufacturers selling directly to consumers. Negotiated wholesale prices increase, thus increasing final prices to consumers and decreasing consumer welfare. We show how our model can be used to quantify the bargaining leverage and welfare effects of direct sales. We estimate our model using data from the outdoor advertising industry and use the estimated model to simulate counterfactual scenarios to isolate these effects. We conclude by discussing the relevance of the bargaining leverage effect for vertical merger evaluation.
    Keywords: Direct-to-consumer sales, bargaining, vertical mergers, advertising
    JEL: D43 L13 L42 L51 L81 M37
    Date: 2020–02–05
  8. By: Yassine Lefouili (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Joana Pinho (Universidade Católica Portuguesa)
    Abstract: We study the price and welfare effects of collusion between two-sided platforms and show that they depend on whether collusion occurs on both sides or a single side of the market, and whether users single-home or multi-home. Our most striking result is that one-sided collusion leads to lower (resp. higher) prices on the collusive (resp. competitive) side if the cross-group externalities exerted on the collusive side are positive and sufficiently strong. One-sided collusion may, therefore, benefit the users on the collusive side and harm the users on the competitive side. Our findings have implications regarding cartel detection and damages actions.
    Keywords: Cross-group externalities,Collusion,Two-sided markets
    Date: 2020–09
  9. By: Drèze, Jean; Khera, Reetika; Somanchi, Anmol (IDinsight)
    Abstract: Maternity benefits of at least Rs. 6,000 per child are a legal right of all Indian women under the National Food Security Act, 2013. In practice, a large majority are still deprived of maternity benefits. A recent survey, conducted in six states of north India, brings out that pregnant women’s basic needs for nutritious food, proper rest and health care are rarely satisfied. Among women who had delivered a child during the 6 months preceding the survey, about half said that they had been eating less rather than more during pregnancy, and nearly 40 per cent complained of a lack of rest at that time. The figures are much worse in states like Uttar Pradesh, where, for instance, one third of the same women had not had a single ante-natal checkup. Average weight gain during pregnancy was just 7 kg over nine months in this sample, down to 4 kg in Uttar Pradesh. Aside from poor nutrition, lack of rest appears to be a major factor of low weight gain during pregnancy. There is an urgent need for better recognition of the special needs of pregnancy, provision of maternity benefits in accordance with the law, and better support for pregnant women including quality health care.
    Date: 2021–04–07
  10. By: Marine Echternach--Jaubert (department of mathematics and industrial engineering - EPM - École Polytechnique de Montréal); Robert Pellerin (department of mathematics and industrial engineering - EPM - École Polytechnique de Montréal); Laurent Joblot (LISPEN - Laboratoire d’Ingénierie des Systèmes Physiques et Numériques - Arts et Métiers Sciences et Technologies - HESAM - HESAM Université)
    Abstract: For an Engineering, Procurement and Construction Management contract, collaboration between the different actors is essential from the very beginning of the project to consider all the constraints. Working upstream reduces the occurrence of problems that could lead to claims. As long as trust and dialogue are present, disputes can be settled by agreement, but if dialogue is cut off, the negotiation phases are over. The solution is then to move to alternative dispute resolution methods involving outside third-party mediator. If, despite this, no agreement is reached, the last option is to proceed to legal proceedings. This paper develops a litigation management process for the construction industry in Quebec (Canada) to guide future litigation project managers, whether they are on the plaintiffs of the defendant's side of the claim. The proposed process links the litigation team members, lawyers and experts. The process divided into ten phases, contains sequences of activities, resources, input and output documents and deliverables. The process was validated in terms of standardization in order to assess its capability to support different construction types of projects and contracts. With this process, litigation managers will be able to oversee litigation through a better visibility of the activities to be planned and forecast costs.
    Keywords: Standardization indicators,Litigation management process,Construction litigation
    Date: 2021
  11. By: Andrew Sharpe
    Abstract: Since 2007, Canada's ranking on the World Bank’s Ease of Doing Business Index (DBI) has fallen from 4th to 23rd in 2020. The DBI is one of two flagship publications of World Bank. It attempts to measure the business environment in ten areas or pillars for 190 countries. Since 2007, Canada’s ranking has fallen in nine of the ten pillars. However, the overall fall in ranking can be largely explained by Canada's deteriorating performance on four of the pillars of the DBI: trading across borders, dealing with construction permits, enforcing contracts and getting electricity. Following a deep dive into Canada’s performance on the pillars of the DBI, a comparison with other international competitiveness and economic environment indexes is made. This section shows that Canada’s performance on the DBI is an outlier, with Canada’s performance on the Global Competitiveness Index, the World Competitiveness Index, the Economic Freedom Index, and the Human Freedom Index all exceeding Canada’s performance on the DBI in 2020. This report also discusses criticisms of the DBI, which is particularly relevant given the temporary suspension of the DBI, announced August, 2020, in response to data irregularities found in the 2018 and 2020 Doing Business Reports.
    Keywords: World Bank, Canada, Doing Business, Ease of Doing Business, Global Affairs Canada, Toronto, ranking, international
    JEL: D63 I38 I31 J18 J24 J15 J6 K37
    Date: 2021–04

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