nep-law New Economics Papers
on Law and Economics
Issue of 2021‒05‒24
fifteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. The Impact of Recreational Marijuana Dispensaries on Crime: Evidence from a Lottery Experiment By Xiuming Dong; Justin Tyndall
  2. Judge Bias in Labor Courts and Firm Performance By Cahuc, Pierre; Carcillo, Stéphane; Moreau, Flavien; PATAULT, Bérengère
  3. Crime concentration and hot spot dynamics in Latin America By Laura Jaitman; Nicolás Ajzenman
  4. The German Federal Constitutional Court Ruling and the European Central Bank's Strategy By Feld, Lars P; Wieland, Volker
  5. Endogenous Driving Behavior in Tests of Racial Profiling By Jesse Kalinowski; Matthew B. Ross; Stephen L. Ross
  6. Patent Screening, Innovation, and Welfare By Schankerman, Mark; Schuett, Florian
  7. Simulating media platform mergers By Ivaldi, Marc; Zhang, Jiekai
  8. Informing WTO Reform: Dispute Settlement Performance, 1995-2020 By Hoekman, Bernard; Mavroidis, Petros C; Saluste, Maarja
  9. Judge Dread: court severity, repossession risk and demand in mortgage and housing markets By Piero Montebruno; Olmo Silva; Nikodem Szumilo
  10. Let's Collude By Aghadadashli, Hamid; Legros, Patrick
  11. Platform Design When Sellers Use Pricing Algorithms By Johnson, Justin; Rhodes, Andrew; Wildenbeest, Matthijs
  12. Evading Corporate Responsibilities: Evidence from the Shipping Industry By Vuillemey, Guillaume
  13. Airbnb and Rental Markets: Evidence from Berlin By Tomaso Duso; Claus Michelsen; Maximilian Schäfer; Kevin Ducbao Tran
  14. Proposal for a common categorisation of IT incidents By Autorité de Contrôle Prudentiel et de Résolution; Banca d’Italia; Commissione Nazionale per le Società e la Borsa; Deutsche Bundesbank; European Central Bank; Federal Reserve Board; Financial Conduct Authority; Ministero dell’Economia e delle Finanze; Prudential Regulation Authority; U.S. Treasury
  15. Shipwrecked by Rents By Arteaga, Fernando; Desierto, Desiree; Koyama, Mark

  1. By: Xiuming Dong (Department of Economics, University of Auckland); Justin Tyndall (University of Hawai‘i at Manoa Department of Economics, University of Hawai‘i Economic Research Organization)
    Abstract: Many North American jurisdictions have legalized the operation of recreational marijuana dispensaries. A common concern is that dispensaries may contribute to local crime. Identifying the effect of dispensaries on crime is confounded by the spatial endogeneity of dispensary locations. Washington state allocated dispensary licenses through a lottery, providing a natural experiment to estimate the causal effect of dispensaries on crime. Combining lottery data with detailed geocoded crime data, we estimate that the presence of a dispensary has no impact on average local crime rates. However, within low-income neighborhoods, we find an increase in property crime adjacent to new dispensaries.
    Keywords: recreational marijuana dispensaries; crime; dispensary opening
    JEL: R38 R50 K23 K42
    Date: 2021–03
  2. By: Cahuc, Pierre; Carcillo, Stéphane; Moreau, Flavien; PATAULT, Bérengère
    Abstract: Does labor court uncertainty and judge subjectivity influence firms performance? We study the economic consequences of judge decisions by collecting information on more than 145,000 Appeal court rulings, combined with administrative firm-level records covering the whole universe of French firms. The quasi-random assignment of judges to cases reveals that judge bias has statistically significant effects on the survival, employment, and sales of small low-performing firms. However, we find that the uncertainty associated with the actual dispersion of judge bias is small and has a non-significant impact on their average outcomes.
    Keywords: employment; Employment protection legislation; Labor courts
    JEL: J01 J08 K31
    Date: 2020–10
  3. By: Laura Jaitman (Inter-American Development Bank); Nicolás Ajzenman (Sao Paulo School of Economics - FGV)
    Abstract: Latin America and the Caribbean is the most violent region in the world, with an annual homicide rate of more than 20 per 100,000 population and with an increasing trend. Yet most evidence of crime concentration, geo-temporal patterns, and event dependencecomes from cities in high-income countries. Understanding crime patterns in the region and how they compare to those in high-income countries is of first-order importance to formulate crime reduction policies. This paper is the first to analyze crime patterns ofcities in five Latin American countries. Using micro-geographic units of analysis, the paper finds, first, that crime in Latin America is highly concentrated in a small proportion of blocks: 50 percent of crimes are concentrated in 3 to 7.5 percent of street segments,and 25 percent of crimes are concentrated in 0.5 to 2.9 percent of street segments. This validates Weisburd’s “law of crime concentration at place” (Weisburd, 2105). These figures are fairly constant over time but sensitive to major police reforms. The secondfinding is that hot spots of crime are not always persistent. Crime is constantly prevalent in certain areas, but in other areas hot spots either appear or disappear, suggesting a possible rational adaptation from criminals to police actions that cause crime displacement in the medium run to other areas. Finally, the paper finds a significant pattern of repeated crime victimization in location and time for property crimes. There are striking similarities with the developed world in crime concentration, although crime levels are much higher and usually increasing. There are also some differences in terms of the persistence of hot spots that pose interesting policy implications and avenues for future research.
    Keywords: crime concentration, crime and place, developing countries, displacement,hot spots, Latin America
    JEL: K00 K42 R12
    Date: 2021–05
  4. By: Feld, Lars P; Wieland, Volker
    Abstract: The ruling of the German Federal Constitutional Court and its call for conducting and communicating proportionality assessments regarding monetary policy have been the subject of some controversy. However, it can also be understood as a way to strengthen the de-facto independence of the European Central Bank. This paper shows how a regular proportionality check could be integrated in the ECB's strategy that is currently undergoing a systematic review. In particular, it proposes to include quantitative benchmarks for policy rates and the central bank balance sheet. Deviations from such benchmarks can have benefits in terms of the intended path for inflation while involving costs in terms of risks and side effects that need to be balanced. Practical applications to the euro area are provided.
    Keywords: central bank independence; Monetary institutions; monetary law; Monetary policy strategy; Policy Rules; Proportionality; Quantitative easing
    JEL: E52 E58 K10
    Date: 2020–09
  5. By: Jesse Kalinowski; Matthew B. Ross; Stephen L. Ross
    Abstract: African-American motorists may adjust their driving in response to increased scrutiny by police. In daylight, when their race is more easily observable, minority motorists are the only group less likely to have fatal motor vehicle accidents. In Massachusetts and Tennessee, we find that African-Americans are the only group of stopped motorists with slower speeds in daylight. Consistent with an illustrative model, these speed shifts are concentrated at higher percentiles of the distribution. Calibration of this model indicates this behavior creates substantial bias in conventional tests of discrimination that rely on changes in the odds a stopped motorist is a minority.
    JEL: H11 I38 J71 J78 K14 K42 R41
    Date: 2021–05
  6. By: Schankerman, Mark; Schuett, Florian
    Abstract: Critics claim that patent screening is ineffective, granting low-quality patents that impose unnecessary social costs. We develop an integrated framework, involving patent office examination, fees, and endogenous validity challenges in the courts, to study patent screening both theoretically and quantitatively. In our model, some inventions require the patent incentive while others do not, and asymmetric information creates a need for screening. We show that the endogeneity of challenges implies that courts, even if perfect, cannot solve the screening problem. Simulations of the model, calibrated on U.S. data, indicate that screening is highly imperfect, with about forty percent of all patents issued on inventions that do not require the patent incentive. While we find that the current patent system generates positive social value, intensifying examination would yield large welfare gains. The social value of the patent system would also be larger if complemented by antitrust limits on licensing.
    Keywords: courts; Innovation; licensing; litigation; patent fees; Patent quality; screening
    JEL: D82 K41 L24 O31 O34 O38
    Date: 2020–09
  7. By: Ivaldi, Marc; Zhang, Jiekai
    Abstract: The empirical analysis of media platforms economics has often neglected the multi-homing behaviour of advertisers. Assuming away the cross-substitutability and/or complementarity between the advertising slots of dierent platforms could damage the quality and the robustness of counterfactual analysis. To evaluate the consequence of such an abstraction, we compare the simulation results of hypothetical platform mergers when the demand on the advertising side is derived from a Translog cost model which allows for multi-homing, and when it is approximated by using a simple log-linear inverse demand model that ignores the dierentiation among media platforms' advertising slots. Ignoring the existence of substitutes or complements on the advertising side would result in overpredicting the losses of the viewers' surplus and in underpredicting the gains in platforms' revenues.
    Keywords: Two-sided market; platform merger; advertising; TV market; competition policy
    JEL: K21 L10 L40 L82 M37
    Date: 2021–03
  8. By: Hoekman, Bernard; Mavroidis, Petros C; Saluste, Maarja
    Abstract: This paper presents salient facts on the performance of WTO dispute settlement, using an updated dataset on cases adjudicated between 1992 and mid 2020. The dataset provides a comprehensive compilation of information on WTO disputes, including complainants, respondents and third parties; the substantive matters tabled; the WTO provisions invoked; the claims that are accepted or rejected by adjudicating bodies; the time involved to complete the consultation, panel and appeal (Appellate Body) stages; and the identity of panelists and how they were appointed. We highlight elements of the operation of the system that are salient to WTO reform discussions, while drawing attention to the richness of the dataset by highlighting stylized facts in the hope others will use the data to investigate specific research questions and hypotheses.
    Keywords: Appellate Body; Conflict resolution; panels; Trade disputes; WTO
    JEL: F13 F51 K40
    Date: 2020–11
  9. By: Piero Montebruno; Olmo Silva; Nikodem Szumilo
    Abstract: We study the impact of borrower protection on mortgage and housing demand. We focus on variation in the likelihood that a house is repossessed - conditional on the mortgage being in arrears and taken to court - coming from heterogeneity in preferences of judges that adjudicate on repossession cases in England and Wales. We develop a simple theoretical framework that shows that too much borrower protection restricts credit supply, while not enough restricts credit demand. Market outcomes depend on which side dominates. To test the predictions of our model, we exploit exogenous spatial variation in repossession risk created by the boundaries of courts' catchment areas. In our setting, housing market characteristics, borrower attributes and mortgage rates do not change discontinuously across these boundaries - allowing us to isolate the causal effects of borrower protection. We find that less borrower protection decreases both mortgage sizes and house prices. This pattern suggests that judges in our sample are too strict and that demand determines market outcomes. Furthermore, we find that our measure of borrower protection does not react to market conditions - causing frictions in credit and housing markets.
    Keywords: house repossessions, mortgages, house prices, housing demand, mortgage default
    Date: 2021–05
  10. By: Aghadadashli, Hamid; Legros, Patrick
    Abstract: Managers have imperfect information about each other's willingness to collude and may signal this willingness through direct communication or market actions. Owners offer bonuses to managers and trade off productive effort provision, higher profits if managers coordinate on high prices, and the risk of antitrust fines if managers explicitly communicate. Our model shows that the distribution of fines between the owners and the managers is crucial for com- munication to be informative. High or low bonuses can reflect the willingness of owners to induce managers to explicitly communicate, and are red flags for corporate responsibility when collusion is supported by direct communication.
    Keywords: Antitrust fines; Collusion; communication; imperfect information; Incentive Schemes; managerial firms; oligopoly
    JEL: C79 D43 D82 K21
    Date: 2020–09
  11. By: Johnson, Justin; Rhodes, Andrew; Wildenbeest, Matthijs
    Abstract: Using both economic theory and Artificial Intelligence (AI) pricing algorithms, we investigate the ability of a platform to design its marketplace to promote competition, improve consumer surplus, and even raise its own profits. We allow sellers to use Q-learning algorithms (a common reinforcement-learning technique from the computer-science literature) to devise pricing strategies in a setting with repeated interactions, and consider the effect of platform rules that reward firms that cut prices with additional exposure to consumers. Overall, the evidence from our experiments suggests that platform design decisions can meaningfully benefit consumers even when algorithmic collusion might otherwise emerge but that achieving these gains may require more than the simplest steering policies when algorithms value the future highly. We also find that policies that raise consumer surplus can raise the profits of the platform, depending on the platform's revenue model. Finally, we document several learning challenges faced by the algorithms.
    Keywords: Algorithms; artificial intelligence; Collusion; platform design
    JEL: K21 L00
    Date: 2020–11
  12. By: Vuillemey, Guillaume
    Abstract: I show that the maritime shipping industry - handling above 80% of global trade flows - has evolved over the past decades to systematically evade "corporate responsibilities," i.e., compliance with regulatory standards and potential tort liabilities. Shipping firms increasingly dissociated legal and ultimate ownership, fragmented assets in one-ship subsidiaries, used flags of convenience, and evaded end-of-life responsibilities with "last-voyage flags." Microeconomic tests confirm that responsibility evasion, amidst global competition, is a dominant motive behind these patterns. These findings have implications for our understanding of corporate social responsibility, of extended forms of liability, and of the "dark side" of globalization.
    Keywords: Corporate social responsibility; flags of convenience; Globalization; limited liability; shipping; subsidiary
    Date: 2020–09
  13. By: Tomaso Duso; Claus Michelsen; Maximilian Schäfer; Kevin Ducbao Tran
    Abstract: We exploit two policy interventions in Berlin, Germany, to causally identify the impact of Airbnb on rental markets. While the first intervention significantly reduced the number of high-availability Airbnb listings bookable for most of the year, the second intervention led to the exit of mostly occasional, low-availability listings. We find that the reduction in Airbnb supply has a much larger impact on rents and long-term rental supply for the first reform. This is consistent with more professional Airbnb hosts substituting back to the long-term rental market. Accordingly, we estimate that one additional nearby high-availability Airbnb listing crowds out 0.6 long-term rentals and, consequently, increases the asked square-meter rent by 1.8 percent on average. This marginal effect tends to be smaller in districts with a higher Airbnb density. However, these district experienced a larger slowdown in rent increases following the reform due to larger reductions in Airbnb supply.
    Keywords: rents, housing market, short-term rental regulation, sharing economy, Airbnb
    JEL: R21 R31 R52 Z30
    Date: 2021
  14. By: Autorité de Contrôle Prudentiel et de Résolution; Banca d’Italia; Commissione Nazionale per le Società e la Borsa; Deutsche Bundesbank; European Central Bank; Federal Reserve Board; Financial Conduct Authority; Ministero dell’Economia e delle Finanze; Prudential Regulation Authority; U.S. Treasury
    Abstract: This paper presents the proposal for a common categorisation of malicious cyber incidents (cyber‑attacks) and other information technology (IT) incidents formulated by ten financial authorities that are members of the G‑7 Cyber Expert Group (CEG) and that represent six of the G‑7 jurisdictions. The aim of the proposal is to promote the harmonisation of the various incident reports that authorities require from financial institutions by defining common principles and developing a common taxonomy for incident reporting. The adoption of these common principles and taxonomy should make incident reporting more robust and effective by facilitating a common understanding of incidents, the sharing of information, and the joint management of IT cross‑border crises.
    Keywords: it incidents, cyber incidents, operational incidents, taxonomy
    JEL: F50 G20 K24 L50
    Date: 2021–05
  15. By: Arteaga, Fernando; Desierto, Desiree; Koyama, Mark
    Abstract: The trade route between Manila and Mexico was a monopoly of the Spanish Crown for more than 250 years. The Manila Galleons were ``the richest ships in all the oceans'', but much of the wealth sank at sea and remain undiscovered. We introduce a newly constructed dataset of all of the ships that travelled this route. We show formally how monopoly rents that allowed widespread bribe-taking would have led to overloading and late ship departure, thereby increasing the probability of shipwreck. Empirically, we demonstrate not only that these late and overloaded ships were more likely to experience shipwrecks or to return to port, but that such effect is stronger for galleons carrying more valuable, higher-rent, cargo. This sheds new light on the costs of rent-seeking in European colonial empires.
    Keywords: Bribery; Corruption; rent-seeking; Shipwrecks
    JEL: K00 N00 N13
    Date: 2020–09

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