nep-law New Economics Papers
on Law and Economics
Issue of 2021‒06‒28
nineteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. The credibility revolution in the empirical analysis of crime By Pinotti, Paolo
  2. A Fresh Look at Whistleblower Rewards By Spagnolo, Giancarlo; Nyreröd, Theo
  3. The Effect of Job Loss and Unemployment Insurance on Crime in Brazil By G.C. Britto, Diogo; Pinotti, Paolo; Sampaio, Breno
  4. Decoding Employment Status By Simon Deakin
  5. The future of investment treaties - possible directions By David Gaukrodger
  6. Do sentencing guidelines result in lower inter-judge disparity? Evidence from a framed field experiment. By Cécile Bourreau-Dubois; Myriam Doriat-Duban; Bruno Jeandidier; Jean-Claude Ray
  7. Rules, Discretion, and Corruption in Procurement: Evidence from Italian Government Contracting By Decarolis, Francesco; Fisman, Raymond; Pinotti, Paolo; Vannutelli, Silvia
  8. Ostracism and Theft in Heterogeneous Groups By Alexandra Baier; Loukas Balafoutas; Tarek Jaber-Lopez
  9. The Effect of Mergers on Variety in Grocery Retailing By Elena Argentesi; Paolo Buccirossi; Roberto Cervone; Tomaso Duso; Alessia Marrazzo
  10. From ‘Capital and Ideology’ to ‘Democracy and Evidence’: A Review of Thomas Piketty By Ewan McGaughey
  11. A Social Recovery, Workplace Democracy and Security: COVID-19 and Labour Law By Ewan McGaughey
  12. Using machine learning to predict patent lawsuits By Juranek, Steffen; Otneim, Håkon
  13. Labour Laws, Informality, and Development: Comparing India and China By Simon Deakin; Shelley Marshall; Sanjay Pinto
  14. WTO Dispute Settlement and the Appellate Body: Insider perceptions and Members' revealed preferences By Fiorini, Matteo; Hoekman, Bernard; Mavroidis, Petros C; Saluste, Maarja; Wolfe, Robert
  15. " How the actors of the traditional distribution resolving by business laws, tensions related to the mutation of the supply chain By Min Feng; Driss Bourazzouq
  16. Taking a Horse to Water? Prospects for the Japanese Corporate Governance Code By John Buchanan; Dominic Chai; Simon Deakin
  17. Speed limits and vehicle accidents in built-up areas: The impact of 30 km/h zones By Davide Cerruti; Massimo Filippini
  18. The role of strategic airline alliances in Africa By Button, Kenneth; Porta, Flavio; Scotti, Davide
  19. Human Rights in Sub Saharan Africa: Understanding the Influence of Militarization, Governance and Democracy By Chimere O. Iheonu; Shedrach A. Agbutun; Chinedum J. Chiemela

  1. By: Pinotti, Paolo
    Abstract: I review recent developments in the economic analysis of crime, focusing in particular on organized crime and corruption. I first discuss the main challenges to the empirical identification of causal relationships -- namely, measurement error due to endogenous reporting of crime and the fact that randomized controlled trials are rarely an option when studying crime. I then discuss recent advancements made possible by the combination of detailed micro-data and quasi-experimental methods.
    Keywords: Economics of crime; identification; Measurement error; Quasi-experiments
    JEL: K42
    Date: 2020–06
  2. By: Spagnolo, Giancarlo (Stockholm Institute of Transition Economics); Nyreröd, Theo (Stockholm Institute of Transition Economics)
    Abstract: Recent years have seen a rapid increase in legislation governing, protecting, and rewarding whistleblowers. Whereas the EU recently enacted a Directive protecting whistleblowers, the US has gone one step further long ago, not only protecting them but also offering substantial monetary rewards for their information. In this paper. we review the evidence for the effectiveness of US whistleblower reward programs and consider some recent novelties. We also consider objections against these programs and local factors in the US that likely contribute to their success. Finally, we voice some concerns over the EU Directive´s ability to achieve its policy objective of enhancing enforcement of Union law.
    Keywords: whistleblowers; whistleblower rewards; corporate wrongdoing
    JEL: K10 K20 K42
    Date: 2021–06–18
  3. By: G.C. Britto, Diogo; Pinotti, Paolo; Sampaio, Breno
    Abstract: We investigate the effect of job loss and unemployment benefits on criminal behavior, exploiting individual-level data on the universe of workers and criminal cases in Brazil over the 2009-2017 period. We match workers displaced upon plausibly exogenous mass layoffs with observationally-equivalent control groups to identify dynamic treatment effects of job loss while allowing for treatment effect heterogeneity. In our preferred specification, the probability of criminal prosecution increases by 23% upon job loss and remains approximately constant during the following years. Our unusually large dataset allows us to precisely estimate increases in almost all types of crimes -- including offenses with no economic motivation -- as well as spillover effects on other household members. The estimated effects remain robust when restricting to arrests ``in flagrante", which are less subject to differential reporting by employment status. We then evaluate the mitigating effect of unemployment benefits leveraging on discontinuous changes in eligibility. Regression discontinuity estimates suggest that unemployment benefits covering 3 to 5 months after displacement completely offset potential crime increases upon job loss, especially for liquidity-constrained individuals, although this effect completely vanishes upon benefit expiration. Our findings point at liquidity constraints and psychological stress as main drivers of criminal behavior upon job loss, while substitution between time on the job and leisure does not seem to play an important role.
    Keywords: crime; Registry Data; unemployment; Unemployment insurance
    JEL: J63 J65 K42
    Date: 2020–05
  4. By: Simon Deakin
    Abstract: There is much at stake in the classification of work relations: on the one hand, the stability of the tax base and the capacity of the state to deliver public goods; on the other, the structure of enterprise and the rights of workers in the ‘gig’ economy and beyond. Classification decisions, however, are made using legal concepts which many view as artificial and manipulable, to the point where it is hard to discern the considerations which are actually guiding decisions. Decomposing the ‘employment’ concept reveals something of the implicit ‘weighting’ of tests and indicators which underlies judicial and administrative determinations. Viewed in this light, statutory reformulations such as the ‘ABC’ test can play a role in ‘reweighting’ the classification process, extending the protective coverage of labour laws and resisting fiscal erosion.
    Keywords: Labour law, tax law, employment status
    JEL: J83 K31 K34
    Date: 2021–04
  5. By: David Gaukrodger (OECD)
    Abstract: As our societies face new challenges and make new demands from policies addressing international investment, there is a new urgency to profoundly reconsider treaties addressing investment. This paper was prepared originally as background for initial inter-governmental and public discussions at the OECD about future investment treaties as well as possible alternatives. The paper surveys potential roles for treaties addressing investment in (i) contributing to sustainable development and responsible business conduct; (ii) preserving and improving investment market access and liberalisation of investment, and facilitating FDI; (iii) regulating subsidised state-owned enterprises, competition in subsidies for investment, and digitalisation; and (iv) addressing the interests of treaty-covered and other investors in reasonable legal predictability and a level playing field, together with the need for policy space and public support for treaty policy. It considers potential use of more flexible and varied remedies and implementation mechanisms. A final section briefly considers treaty policies as governments and societies confront the urgent challenge of climate change.
    Keywords: environmental law, human rights, labour law, responsible business conduct, sustainable development
    JEL: F18 F13 F21 F23 F53 F60 K23 K32 K33 K40
    Date: 2021–06–28
  6. By: Cécile Bourreau-Dubois; Myriam Doriat-Duban; Bruno Jeandidier; Jean-Claude Ray
    Abstract: We study the decision-making of judges in an experimental setting resembling real world judicial decision-making. We gave 312 future judges 48 vignettes built from real data related to divorce cases involving children. We compared two different subject pools: judges who were asked to set child support awards with an advisory guideline and judges who were asked to set child support awards without any guidelines. We found that the introduction of such a guideline helps to reduce the disparity between judges (i.e., the variance in similar cases is lower when the subjects have the opportunity to use the guideline) but that this effect is not systematic, as an increase in heterogeneity was observed in some specific cases.
    Keywords: controlled experiment, field experiment, judicial sentencing, child support, guidelines.
    JEL: C81 H55 I38
    Date: 2021
  7. By: Decarolis, Francesco; Fisman, Raymond; Pinotti, Paolo; Vannutelli, Silvia
    Abstract: The benefits of bureaucratic discretion depend on the extent to which it is used for public benefit versus exploited for private gain. We study the relationship between discretion and corruption in Italian government procurement auctions, using a confidential database of firms and procurement officials investigated for corruption by Italian enforcement authorities. Based on a regression discontinuity design around thresholds for discretion, we find that, overall, a large increase in the use of discretionary procedures in the 2000s led to a minimal increase in auctions won by investigated firms. By further investigating the attributes of ``corrupted'' auctions, we uncover two main factors that drive this ``non-result.'' First, discretionary procedure auctions are associated with corruption only when conducted with fewer than the formally required number of bidders or employing discretionary criteria (``scoring rule'' rather than first price), which comprise a small fraction of discretionary auctions overall. We further show that, while these ``corruptible'' discretionary auctions are chosen more often by officials who are themselves investigated for corruption, they are used less often in procurement administrations in which at least one official is investigated for corruption. These findings fit with a framework in which more discretion leads to greater efficiency as well as more opportunities for theft, and a central monitor manages this trade-off by limiting discretion for high-corruption procedures and locales. Additional results based on two standard tools for curbing corruption -- turnover and subcontracting limits -- corroborate this interpretation. Overall, our results imply that discretion is under-utilized, given the high potential benefits as compared to the modest increment in corruption.
    Keywords: Bribes; bureaucracy; Competition; Corruption; Procurement
    JEL: D73 H57 K42
    Date: 2020–05
  8. By: Alexandra Baier; Loukas Balafoutas; Tarek Jaber-Lopez
    Abstract: Ostracism, or exclusion by peers, has been practiced since ancient times as a severe form of punishment against transgressors of laws or social norms. The purpose of this paper is to offer a comprehensive analysis on how ostracism affects behavior and the functioning of a social group. We present data from a laboratory experiment, in which participants face a social dilemma on how to allocate limited resources between a productive activity and theft, and are given the opportunity to exclude members of their group by means of majority voting. Our main treatment features an environment with heterogeneity in productivity within groups, thus creating inequalities in economic opportunities and income. We find that exclusion is an effective form of punishment and decreases theft by excluded members once they are re-admitted into the group. However, it also leads to some retaliation by low-productivity members. A particularly worrisome aspect of exclusion is that punished group members are stigmatized and have a higher probability of facing exclusion again. We discuss implications of our findings for penal systems and their capacity to rehabilitate prisoners.
    Keywords: ostracism, social dilemma, theft, rehabilitation, heterogeneous groups
    JEL: C91 C92 K42
    Date: 2021
  9. By: Elena Argentesi; Paolo Buccirossi; Roberto Cervone; Tomaso Duso; Alessia Marrazzo
    Abstract: We study the effect of a merger between two Dutch supermarket chains to assess its effect on the depth as well as composition of assortment. We adopt a difference-in-differences strategy that exploits local variation in the merger’s effects, controlling for selection on observables through a matching procedure when defining our control group. We show that the merger led the merging parties to reposition their assortment to avoid cannibalization in the areas where they directly competed before the merger. While the low-variety target’s stores reduced the depth of their assortment when in direct competition with the acquirer, the latter increased their assortment. This suggests that variety is a strategic variable in retail chains’ response to changes in local competition.
    Keywords: variety, assortment, mergers, ex-post evaluation, retail sector, supermarkets, grocery
    JEL: L10 L41 L66 L81 D22 K21 C23
    Date: 2021
  10. By: Ewan McGaughey
    Abstract: Thomas Piketty’s Capital and Ideology (2020) is a major, encyclopaedic and data-driven contribution to the effort of constructing a better human civilisation. This review summarises the main argument: a positive thesis that in every society, ideology feeds laws and institutions that create inequality, and inequality then bolsters ideology; a normative thesis that we need a better ideology, including ‘participatory socialism’, to solve our biggest challenges. The review then complements and critiques three central issues in the argument, that (1) the true concentration of economic power, the votes in the economy, is even more extreme than inequality of wealth and income, (2) the legal construction of markets, through property, contract, corporate, or human rights law, can ‘pre-distribute’ income and wealth to a vast extent before tax, and (3) social justice means expanding (not merely correcting or re-distributing) everyone’s opportunity, creative capacity, and human potential, and helps everyone to develop their personality to the fullest. Social justice is an unparalleled force, and is still the best answer to far-right, authoritarian or other failed ideologies, which have escalated inequality and driven climate damage. Perhaps the greatest achievement of Piketty’s work could be to bring economics firmly back to the values in the Universal Declaration of Human Rights.
    Keywords: Capital, ideology, democracy, evidence, banks, asset managers, codetermination, economic power, social justice
    JEL: K10 K11 K22 K31
    Date: 2021–04
  11. By: Ewan McGaughey
    Abstract: The COVID-19 pandemic has shown the painful consequences of poor job security and workplace democracy. The UK government’s initial flirt with ‘herd immunity’, the delay in lockdown, and the absence of a work strategy that prioritised safety after the summer of 2020, caused among the most appalling death rates in the world, worse than Trump’s America. However, a swift change in the job security policy stemmed mass unemployment, after initial reports of 2.1 million people claiming unemployment benefits. The ‘Coronavirus Job Retention Scheme’ eventually meant that the unemployment statistics (as opposed to claimant count) showed only a modest jobless rise. Comparison with the US where there are effectively no rights, and other countries with strong rights, shows that universal social security and workplace democracy are at the core of successful economic performance. This paper explains the UK’s health and safety rights, how the job retention scheme was unfurled with extension to employed and self-employed, and the connection between votes at work and employment. It shows how reality discredits the minority views of economic theorists who oppose labour rights, and suggests the legal reforms we can undertake to achieve a social recovery.
    Keywords: COVID-19, coronavirus, labour law, labor law, employment law, health, education, university, pandemic, Coronavirus Job Retention Scheme, health and safety, social security, workplace democracy
    JEL: K10 K31 K32 K34 I10 I13 I14 D01 D21 D22 E01 E24
    Date: 2021–04
  12. By: Juranek, Steffen (Dept. of Business and Management Science, Norwegian School of Economics); Otneim, Håkon (Dept. of Business and Management Science, Norwegian School of Economics)
    Abstract: We use machine learning methods to predict which patents end up at court using the population of US patents granted between 2002 and 2005. We analyze the role of the different dimensions of an empirical analysis for the performance of the prediction - the number of observations, the number of patent characteristics and the model choice. We find that the extending the set of patent characteristics has the biggest impact on the prediction performance. Small samples have not only a low predictive performance, their predictions are also particularly unstable. However, only samples of intermediate size are required for reasonably stable performance. The model choice matters, too, more sophisticated machine learning methods can provide additional value to a simple logistic regression. Our results provide practical advice to everyone building patent litigation models, e.g., for litigation insurance or patent management in more general.
    Keywords: Patents; litigation; prediction; machine learning
    JEL: K00 K41 O34
    Date: 2021–06–22
  13. By: Simon Deakin; Shelley Marshall; Sanjay Pinto
    Abstract: This paper explores trends in the formalisation and informalisation of work, focusing on the world’s two largest labour markets, India and China. A first task in is to define what is meant by informal work. The definitions used by international agencies are not uniform and different countries have distinct approaches. There are numerous dimensions to informality that are not fully captured in statistical data. There is a trend towards formal employment and away from own-account work and self-employment in many regions of the world, particularly in East Asia where the proportion of the labour force in waged employment has doubled over the past three decades. The paper will look more closely at the contrasting cases of India (where formal work has increased recently, but to a very small extent) and China (where a variant of the standard employment contract may be emerging), discuss reasons for the divergence between them, and consider the relationship between formality and developmental outcomes in the two countries.
    Keywords: Informality, labour laws, employment contract, India, China
    JEL: J46 J68 K31
    Date: 2020–03
  14. By: Fiorini, Matteo; Hoekman, Bernard; Mavroidis, Petros C; Saluste, Maarja; Wolfe, Robert
    Abstract: The WTO dispute settlement system is in crisis, following the decision of the United States to block new appointments to the Appellate Body (AB). The AB went into hibernation in December 2019, not having enough sitting members to be able to operate. What do WTO members think of the performance of WTO dispute settlement? How much do WTO members care about the existence and operation of an appeals mechanism? In this paper, we report on the results of a survey of WTO Members' perceptions of the AB and the role it plays (should play). We complement this with data on Members' revealed preferences in their use of the dispute settlement system, their intervention in WTO debates on the AB crisis and their responses to demise of the AB. The data reveal strong support for the basic design of the dispute settlement system but also that the United States is not alone in perceiving that the AB went beyond its mandate. There are substantive questions that need to be addressed if the Appellate Body impasse is to be resolved.
    Keywords: Appellate Body; Conflict resolution; Dispute Settlement; WTO
    JEL: F13
    Date: 2020–05
  15. By: Min Feng (Centre de Recherche Magellan - UJML - Université Jean Moulin - Lyon 3 - Université de Lyon - Institut d'Administration des Entreprises (IAE) - Lyon, TSM - Toulouse School of Management Research - UT1 - Université Toulouse 1 Capitole - CNRS - Centre National de la Recherche Scientifique - TSM - Toulouse School of Management - UT1 - Université Toulouse 1 Capitole, TSM - Toulouse School of Management - UT1 - Université Toulouse 1 Capitole, Institut d'Administration des Entreprises (IAE) - Lyon, UT1 - Université Toulouse 1 Capitole); Driss Bourazzouq (LAREQUOI - Laboratoire de recherche en Management - UVSQ - Université de Versailles Saint-Quentin-en-Yvelines, UVSQ - Université de Versailles Saint-Quentin-en-Yvelines, Université Paris-Saclay)
    Abstract: In our empirical study, we'd like to analyze the case of many traditional retailers around Europe with a view of competition with other on-line traders and distributors, the objective is to understand if using law and management strategy, using business legal strategies like patent or brands or other legal strategies (legal monopoly etc…) helps the traditional retailers to compete again the 100% online retailers, by developing among other a multichannel protected distribution.
    Date: 2021–05–29
  16. By: John Buchanan; Dominic Chai; Simon Deakin
    Abstract: In 2014-15 Japan implemented a series of reforms to its corporate governance regime. The principal measures adopted were the country’s first Corporate Governance Code, revisions to its Companies Law, and a Stewardship Code, together with a report (the Ito Review) on corporate competitiveness and incentives for growth. In this paper we analyse the objectives of these reforms and make an assessment of their likely success, drawing on interviews with key actors in Japanese government, finance and industry. We firstly frame our analysis by a consideration of what institutional theory has to say about the relationship between formal and informal norms and practices, and about the feasibility of using regulatory mechanisms of different types to alter embedded routines. We then consider the historical evolution of Japanese corporate governance since the early 20th century and explore the causes of its current embeddedness and apparent resistance to change, noting pressures in the past which in some cases have changed it greatly while in others have had little effect. We then examine the manner in which the current reforms were devised and implemented, their content, and the influences that shaped them. We then discuss the methods used to conduct our primary interview research, which was carried out in 2016-17 with policy makers, corporate managers, investors and other interested parties. We use our interviews to identify how the reforms were formulated and how they have been received. We then present our assessment. We suggest that despite a pattern of embedded institutions resisting regulatory pressures for change in recent years, Japanese corporate governance may now have reached one of its historical turning points. The introduction into Japan of the 'comply or explain' approach, the major innovation that distinguishes this reform exercise, is a significant moment. The existence of a corporate 'compliance machine' of administrative officers below board level, whose role is to interpret regulation and present it in executable form to their boards of directors, improves the Code’s chances of implementation at large, listed companies. The Stewardship Code, meanwhile, has the potential to co-opt institutional investors' interests to the economic reform agenda of the political class. These politicians have shown an unusual degree of commitment to the reform process and continue to give it their strong support. At the same time, there are potential obstacles to unqualified adoption of the Corporate Governance Code, especially for smaller companies that lack administrative resources, and the 2018 revision of the Code has introduced some doctrinaire elements which seem at odds with the realities of governance in most Japanese companies. Moreover, some doubt remains regarding the ability of corporate governance reforms to deliver the kind of economic revival that politicians are seeking, at least in the short to medium term. Thus the question of whether the Corporate Governance Code will bring about lasting change in Japanese corporate practice remains an open one. The Code has clear advantages over previous attempts at reform but we compare this process to the proverbial 'taking a horse to water', because no amount of formal exhortation will succeed if the horse chooses not to drink.
    Keywords: Corporate governance code, stewardship code, comply and explain, Japan
    JEL: G34 G38 K22
    Date: 2020–03
  17. By: Davide Cerruti (CER–ETH – Center of Economic Research at ETH Zurich, Switzerland); Massimo Filippini (CER–ETH – Center of Economic Research at ETH Zurich and Facoltà di Scienze Economiche, Università della Svizzera Italiana, Switzerland)
    Abstract: Vehicle accidents represent an important source of externalities from driving. Using a detailed dataset on accident location and characteristics in Switzerland, we estimate the effect of switching from a 50 km/h speed limit to a 30 km/h limit on the probability of vehicle accident injuries. After an initial country-wide analysis, we exploit the quasi-experimental variation of the timing of introduction of 30 km/h zones in the municipality of Basel, using a difference in differences strategy. We find a significant reduction in accident severity due to lower speed limits, and substantial heterogeneities based on the circumstances of the accident.
    Keywords: Speed limits; vehicle accidents; 30 km/h zones; externalities; road transport; urban roads
    JEL: R41 R42 R48 H41
    Date: 2021–06
  18. By: Button, Kenneth; Porta, Flavio; Scotti, Davide
    Abstract: This paper looks at the impacts of strategic airline alliances on African aviation. Globally, there has been an on-going trend towards airlines coordinating their activities via strategic alliances and joint ventures. These alliances affect market competition including the quality and costs of the services provided. Despite the economic benefits found in prior analyses of alliances in other markets there has been very limited study of alliance participation by African airlines. Our analysis suggests, among other things, that membership of one of the three global alliances could benefit African airlines, add to their passenger flows, and enhance regional economic integration.
    Keywords: Africa’s strategic air alliances; airline economics; airline cooperation; airline networks
    JEL: K21 L93 N37 R40
    Date: 2020
  19. By: Chimere O. Iheonu (Abuja, Nigeria); Shedrach A. Agbutun (University of Nigeria, Nsukka, Nigeria); Chinedum J. Chiemela (University of Nigeria, Nsukka, Nigeria)
    Abstract: This study provides empirical evidence on the impact of militarization, governance, and democracy on human rights in sub-Saharan Africa (SSA) for the period 2002 to 2018. The study employed the instrumental variable Fixed Effects model to account for simultaneity/reverse causality, and unobservable heterogeneity as well as the instrumental variable quantile regression with Fixed Effects to account for existing levels of human rights in SSA. Based on the Fixed Effects results, it is revealed that militarization significantly increases human rights violation in the region, while governance and democracy significantly improve human rights. Results from the quantile regression show that (1) the negative impact of militarization on human rights is observable across all quantiles, (2) the positive impact of the control of corruption on human rights is more pronounced in countries where the existing level of human rights is high, while political stability and rule of law exerts stronger impact on human rights in countries where the existing level of human rights is low, (3) the positive impact of democracy on human rights is stronger in countries where the existing level of human rights is high. Policy recommendations based on these findings are discussed.
    Keywords: Human Rights; Militarization; Governance; Democracy; Sub-Saharan Africa
    JEL: C21 C23 K38
    Date: 2021–01

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