nep-law New Economics Papers
on Law and Economics
Issue of 2021‒05‒03
ten papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. The German Facebook Case: The Law and Economics of the Relationship between Competition and Data Protection Law By Wolfgang Kerber; Karsten K. Zolna
  2. Welfare Cuts and Crime: Evidence from the New Poor Law By Melander, Eric; Miotto, Martina
  3. Distressed Acquisitions: Evidence from European Emerging Markets By Ichiro Iwasaki; Evžen Kocenda; Yoshisada Shida
  4. Bargaining Failure and Freedom to Operate: Re-evaluating the Effect of Patents on Cumulative Innovation By Gaessler, Fabian; Harhoff, Dietmar; Sorg, Stefan
  5. Competition in the Black Market:Estimating the Causal Effect of Gangs in Chicago By Jesse Bruhn
  6. Infrequent Identity Signals and Detection Risks in Audit Correspondence Studies By Catherine Balfe; Patrick Button; Mary Penn; David Schwegman
  7. Do Stronger Employment Discrimination Protections Decrease Reliance on Social Security Disability Insurance? Evidence from the U.S. Social Security Reforms By Patrick Button; Mashfiqur R. Khan; Mary Penn
  8. Dishonesty and Public Employment. By Guillermo Cruces; Martín A. Rossi; Ernesto Schargrodsky
  9. Framework to discuss corruption in OECD Economic Surveys By Yosuke Jin
  10. The Public Health Effects of Legalizing Marijuana By Anderson, D. Mark; Rees, Daniel I.

  1. By: Wolfgang Kerber (University of Marburg); Karsten K. Zolna (University of Marburg)
    Abstract: Can competition law also take into account effects on privacy or should privacy concerns of data-collecting behaviour only be dealt with by data protection law? In this paper we are analysing the German Facebook case, in which certain terms of service (that force consumers to give consent for merging personal data collected through Facebook services with those collected from tracking and third-party websites) were prohibited as exploitative abuse of a dominant firm. We show from an economic perspective that due to the simultaneous existence of two market failures (market dominance, information and behavioral problems) and complex interaction effects between both market failures and both policies in digital markets, the traditional approach of a strict separation of both policies is not possible any more, leading to the need for more collaboration and alignment of both policies. With respect to the substantive question of protecting a minimum level of choice options for consumers regarding personal data vis-a-vis dominant digital platform firms, the recent decision of the German Federal Court of Justice in the Facebook case and the proposed Digital Market Act have opened new perspectives for dealing with privacy concerns in competition law and regulation.
    Keywords: competition law, Facebook, digital platforms, privacy, data protection law
    JEL: K21 K24 L40 L50
    Date: 2021
  2. By: Melander, Eric (University of Namur and CAGE); Miotto, Martina (CERGE-EI and CAGE)
    Abstract: The New Poor Law reform of 1834 induced dramatic and heterogeneous reductions in welfare spending across English and Welsh counties. Using the reform in a difference-in-differences instrumental variables strategy, we document a robust negative relationship between the generosity of welfare provision and criminal activity. Results are driven by non-violent property crimes and are stronger during months of seasonal agricultural unemployment, indicating that a combination of welfare cuts and precarious work opportunities lowered the opportunity cost of crime for economically vulnerable individuals. We use data on county police forces and individual-level criminal records to rule out alternative mechanisms related to changes in policing and sentencing.
    Keywords: welfare spending, austerity, crime, poor laws JEL Classification: H53, I38, K42, N33
    Date: 2021
  3. By: Ichiro Iwasaki; Evžen Kocenda; Yoshisada Shida
    Abstract: We analyze factors behind 23,213 distressed acquisitions in European emerging markets from 2007–2019. Besides the impact of financial ratios, legal form, ownership structure, firm size, and age, we emphasize the role of institutions and channels of their propagation. We show that the quality and enforcement of insolvency laws are linked with the lower probability of distressed acquisitions, followed by corruption control and progress in banking reforms. The impact of institutions is larger in less-advanced countries as compared to economically stronger ones. The effect of institutions increased after the financial crisis but declined as the economic situation improved.
    Keywords: distressed acquisitions, mergers, European emerging markets
    JEL: C35 D02 D22 E02 G34 K20 L22
    Date: 2021
  4. By: Gaessler, Fabian (MPI-IC Munich); Harhoff, Dietmar (MPI-IC Munich); Sorg, Stefan (MPI-IC Munich)
    Abstract: We investigate the causal effect of patent rights on cumulative innovation, using large-scale data that approximate the patent universe in its technological and economic variety. We introduce a novel instrumental variable for patent invalidation that exploits personnel scarcity in post-grant opposition at the European Patent Office. We find that patent invalidation leads to a highly significant and sizeable increase of follow-on inventions. The effect is driven by cases where the removal of the individual exclusion right creates substantial freedom to operate for third parties. Importantly, our results suggest that bargaining failure between original and follow-on innovators is not limited to environments commonly associated with high transaction costs.
    Keywords: cumulative innovation; patents; bargaining failure; freedom to operate; opposition;
    JEL: K41 L24 O31 O32 O33 O34
    Date: 2019–12–16
  5. By: Jesse Bruhn
    Abstract: I study criminal street gangs using new data that describes the geospatial distribution of gang territory in Chicago and its evolution over a 15-year period. Using an event study design, I show that city blocks entered by gangs experience sharp increases in the number of reported batteries (6%), narcotics violations (18.5%), weapons violations (9.8%), incidents of prostitution (51.9%), and criminal trespassing (19.6%). I also find a sharp reduction in the number of reported robberies (-8%). The findings cannot be explained by pre-existing trends in crime, changes in police surveillance, crime displacement, exposure to public housing demolitions, reporting effects, or demographic trends. Taken together, the evidence suggests that gangs cause small increases in violence in highly localized areas as a result of conflict over illegal markets. I also find evidence that gangs cause reductions in median property values (-$8,436.9) and household income (-$1,866.8). Motivated by these findings, I explore the relationship between the industrial organization of the black market and the supply of criminal activity. I find that gangs that are more internally fractured or operate in more competitive environments tend to generate more crime. This finding is inconsistent with simple, market-based models of criminal behavior, suggesting an important role for behavioral factors and social interactions in the production of gang violence.
    Date: 2021
  6. By: Catherine Balfe; Patrick Button; Mary Penn; David Schwegman
    Abstract: Audit correspondence studies are field experiments that test for discriminatory behavior in active markets. Researchers measure discrimination by comparing how responsive individuals ("audited units") are to correspondences from different types of people. This paper elaborates on the tradeoffs researchers face between sending audited units only one correspondence and sending them multiple correspondences, especially when including less common identity signals in the correspondences. We argue that when researchers use audit correspondence studies to measure discrimination against individuals that infrequently interact with audited units, they raise the risk that these audited units become aware they are being studied or otherwise act differently. We present the result of an audit correspondence study that demonstrates how this detection can occur when researchers send more than one correspondence from an uncommon minority group. We show how this detection leads to attenuated (downwardly biased) estimates of discrimination.
    JEL: C93 J15 J16 J71 K42 Z13
    Date: 2021–04
  7. By: Patrick Button; Mashfiqur R. Khan; Mary Penn
    Abstract: This paper examines spillovers onto Social Security Disability Insurance (SSDI) that occurred due to the Social Security Amendments of 1983, which, among other changes, gradually increased the retirement age for full benefits from 65 to 67. We determine whether the spillovers onto SSDI were different in states with age and disability discrimination laws that were broader (covered more people) or stronger (allowed for more damages for plaintiffs) than the federal Age Discrimination in Employment Act and the Americans with Disabilities Act. Our paper uses three sources of data: (1) counts of the universe of SSDI applications and receipts by state, age group, sex, and year; (2) the Health and Retirement Study, merged with restricted-access state identifiers; and, (3) the Health and Retirement Study, merged with restricted access state identifiers and Social Security Administration Form-831 disability records. To quantify the moderating impact of existing state laws on spillovers onto SSDI applications, receipts and employment, we use a difference-in-differences approach, comparing age cohorts who were affected by the reforms to similar age cohorts who were unaffected, and then this comparing this affected-unaffected difference across states by state law. Using the Health and Retirement Study data, we also conduct heterogeneity analysis to determine if effects differed for different age groups (ages 55-61, ages 62-64, ages 65 to the full benefits retirement age), those with or without disabilities, and by sex. The paper found that: ¥ Spillovers to SSDI application and receipt occurred mostly at ages 55-61 rather and ages closer to traditional retirement ages. These spillovers almost exclusively occurred for those with disabilities only. The employment effects from the Social Security Amendments instead affected those without disabilities and those closer to traditional retirement ages more. Women faced larger spillovers to both SSDI application and receipt and to employment. ¥ States with a medical definition of disability, which much more broadly covers individuals by state employment discrimination laws compared to the restrictive federal Americans with Disabilities Act, had reduced spillovers to SSDI application. In some cases, this was also associated with reductions in SSDI receipt, but our strongest evidence suggests just a decrease in SSDI applications. ¥ There is weak evidence that other broader or stronger features of state disability discrimination laws reduce SSDI application and receipt. ¥ We do not find any clear moderating effect of disability discrimination laws on employment. ¥ We do not find any moderating effect of broader or stronger features of state age discrimination laws and SSDI application and receipt, but we do find evidence that these features boost employment for those approaching traditional retirement age. The policy implications of the findings are: ¥ A broader definition of disability under discrimination law, like the medical definition of disability, seems to be associated with reduced SSDI applications. These foregone SSDI applications, which we argue in the paper were likely unsuccessful, reduced costs both for applicants and for SSA, given the large and indirect costs of SSDI application, especially given the long wait times for a final decision. ¥ Other stronger and broader features of disability discrimination laws may also reduce reliance on SSDI. ¥ There is not clear evidence that disability discrimination laws boost or reduce employment, suggesting that they may not have a strong role in affecting employment outcomes for individuals with disabilities and/or older workers.
    Date: 2021–04
  8. By: Guillermo Cruces; Martín A. Rossi; Ernesto Schargrodsky
    Abstract: We study the link between dishonesty and selection into public employment. When military conscription was mandatory in Argentina, eligibility was determined by a lottery and by a medical examination. In order to avoid conscription, drafted individuals had strong incentives to cheat in their medical examination. These incentives varied with the lottery number. Exploiting this exogenous variation in the propensity to engage in dishonest behavior during early adulthood (the “impressionable” years), we find that individuals with higher probability of having cheated in their health checks as young adults also show higher propensity to become public employees later in life.
    Keywords: Military service, conscription, public sector, state capacities, cheating
    JEL: K2
    Date: 2020–11
  9. By: Yosuke Jin
    Abstract: The abuse of public office for private gains – discourages business dynamism, reducing investment and innovation, and weighs on growth prospects. It also undermines the equality of opportunities, distorts the income distribution and erodes trust in government. Corruption is often closely associated with other economic crimes such as tax evasion and money laundering. Corruption takes diverse forms such as bribery and abuse of functions, and is often a multi-faceted phenomenon. It prevails through many different mechanisms, stemming from deficiencies in specific policy areas under weak constraints against corrupt behaviour. Therefore, successfully combatting corrupt behaviour requires a comprehensive approach, addressing a wide range of policy areas. The framework developed in this paper explores in detail how corruption is associated with different policy settings. This framework also makes the most use of the existing corruption indicators, which reflect different understandings of corruption, in order to identify priority policy areas for each country. This framework aims to serve as a pathway to orient OECD Economic Surveys to state-of-the-art policy discussions which have been increasingly matured in each policy area within the Organisation.
    Keywords: corruption, economic crimes, law enforcement, public integrity
    JEL: D73 H10 K40
    Date: 2021–04–26
  10. By: Anderson, D. Mark (Montana State University); Rees, Daniel I. (University of Colorado Denver)
    Abstract: Thirty-six states have legalized medical marijuana and 14 states have legalized the use of marijuana for recreational purposes. In this paper, we review the literature on the public health consequences of legalizing marijuana, focusing on studies that have appeared in economics journals as well as leading public policy, public health, and medical journals. Among the outcomes considered are: youth marijuana use, alcohol consumption, the abuse of prescription opioids, traffic fatalities, and crime. For some of these outcomes, there is a near consensus in the literature regarding the effects of medical marijuana laws (MMLs). As an example, leveraging geographic and temporal variation in MMLs, researchers have produced little credible evidence to suggest that legalization promotes marijuana use among teenagers. Likewise, there is convincing evidence that young adults consume less alcohol when medical marijuana is legalized. For other public health outcomes such as mortality involving prescription opioids, the effect of legalizing medical marijuana has proven more difficult to gauge and, as a consequence, we are less comfortable drawing firm conclusions. Finally, it is not yet clear how legalizing marijuana for recreational purposes will affect these and other important public health outcomes. We will be able to draw stronger conclusions when more post-treatment data are collected in states that have recently legalized recreational marijuana.
    Keywords: marijuana legalization, public health
    JEL: I1 H7 K42
    Date: 2021–04

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