nep-law New Economics Papers
on Law and Economics
Issue of 2021‒09‒27
nine papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Immigrants, Legal Status, and Illegal Trade By McCully, Brett
  2. Caste, Courts and Business By Chakraborty, Tanika; Mukherjee, Anirban; Saha, Sarani; Shukla, Divya
  3. Human Rights in Sub Saharan Africa: Understanding the Influence of Militarization, Governance and Democracy By Chimere O. Iheonu; Shedrach A. Agbutun; Chinedum J. Chiemela
  4. Litigation Risk and Corporate Cash Holdings:Evidence from a Legal Shock By Tommaso Oliviero; Min Park; Hong Zou
  5. The impact of common law on the volume of legal services: An international study By Enzo Dia; Jacques Melitz
  6. Robots and Labor Regulation: A Cross-Country/Cross-Industry Analysis By Silvio Traverso; Massimiliano Vatiero; Enrico Zaninotto
  7. Ordinary Shareholders' Rights Protection in Boltswana By Ratang Sedimo; Kelesego Mmolainyane
  8. Whistleblowing in Botswana's Construction Industry: A public and private sector perspective By Marumo Omotoye
  9. Fragile Algorithms and Fallible Decision-Makers: Lessons from the Justice System By Jens Ludwig; Sendhil Mullainathan

  1. By: McCully, Brett
    Abstract: Nearly $2 trillion of illegally trafficked goods flow across international borders every year, generating violence and other social costs along the way. Some have controversially linked illegal trafficking to immigrants, especially immigrants without legal status. In this paper, I use novel data on nearly 10,000 confiscations of illegal drugs in Spain to study how immigrants and immigration policy affect the pattern and scale of illegal drug trafficking. To identify the causal effect of immigrants on trafficking, I construct an instrumental variable that interacts variation in total immigrant inflows into Spain across origin countries with the fraction of immigrants inflowing into a province. I find that a 10% increase in the population of immigrants from a given origin country relative to the mean raises the likelihood of illegal importing drugs from that origin country by 0.8 percentage points. Moreover, immigrants without legal status drive illegal drug imports, while authorized immigrants drive exports. To better understand the role of legal status, I exploit an extraordinary regularization of nearly half a million immigrants in 2005. Event study estimates suggest that granting immigrants legal status results in a decline in drug imports.
    Keywords: Immigration, Drug Trafficking, Trade, Legal Stutus
    JEL: F14 F22 J15 K42
    Date: 2021–07
  2. By: Chakraborty, Tanika; Mukherjee, Anirban; Saha, Sarani; Shukla, Divya
    Abstract: We study the role of formal institutions of contract enforcement in facilitating investments in small and medium firms(MSME). In a framework where established entrepreneurs can enforce contracts informally using their network ties and hierarchical advantage, we argue that an efficient formal judiciary helps entrepreneurs without any ties to informal business networks, disproportionately more. We test our theoretical prediction using a novel administrative panel-data from Indian courts and the nationally representative MSME survey data. Empirically, we treat entrepreneurs from disadvantaged castes (SC-ST) as those without traditional business-network ties. We find that improvement in court quality has a disproportionately larger impact on the investment decisions of SC-ST entrepreneurs. On average, if the time taken for a court to clear all existing cases reduces by 1 year, the initial gap in the probability of investing, between SC-ST and other entrepreneurs, gets reduced by 0.6-0.7 percentage points.
    Keywords: Judiciary,Duration Index,MSME,Entrepreneurship
    JEL: K12 L26 O17
    Date: 2021
  3. 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
  4. By: Tommaso Oliviero (Università di Napoli Federico II and CSEF); Min Park (University of Bristol); Hong Zou (University of Hong Kong)
    Abstract: Theory offers two diverging views on the effect of ex-ante litigation risk on corporate cash holdings. To test the effect, this paper exploits the phase-by-phase introduction of securities class actions in Korea. Following the increase in litigation risk, firms significantly increase their cash holdings. The effects are stronger for firms with high operating cash flow volatility, no D&O insurance coverage, and tighter financial constraints. The results hold robustly in differences-in-differences and regression discontinuity designs. The causal estimates, together with the increase in corporate litigation risk worldwide, put forth a novel link, unexplored in the literature, between litigation risk and the secular increase in cash holdings.
    Keywords: Liquidity; cash holdings; litigation risk; difference-in-differences; regression discontinuity.
    JEL: G30 G32 K22
    Date: 2021–09–06
  5. By: Enzo Dia (Universita degli Studi di Milano Bicocca); Jacques Melitz (CREST, CEPII, Heriot-Watt University)
    Abstract: We show that the heavy use of legal services relativeto output in the US is not a peculiarity of the country but applies to common law countries in general. It stems largely from better ability to contract and easier access to justice. Yet in close association, common law also opens significantly more room for rent-seeking by lawyers than civil law. There by the costs could outweigh the benefits. Both real GDP per capita and openness emerge as further factors making room for lawyers.
    Keywords: Common law, civil law, rent-seeking, openness
    JEL: K15 K00
    Date: 2021–09–20
  6. By: Silvio Traverso; Massimiliano Vatiero; Enrico Zaninotto
    Abstract: This work discusses and empirically investigates the relationship between labor regulation and robotization. In particular, the empirical analysis focuses on the relationship between the discipline of workers’ dismissal and the adoption of indus- trial robots in nineteen Western countries over the 2006–2016 period. We find that high levels of statutory employment protection have been negatively associated with robot adoption, suggesting that labor-friendly national legislations, by increasing adjustment costs (such as firing costs), and thus making investment riskier, provide less favorable environments for firms to invest in industrial robots. We also find, however, that the correlation is positively mediated by the sectoral levels of capital intensity, a hint that firms do resort to industrial robots as potential substitutes for workers to reduce employees’ bargaining power and to limit their hold-up opportu- nities, which tend to be larger in sectors characterized by high levels of operating leverage.
    Keywords: Robot adoption, Labor regulation, Hold-up
    JEL: K31 O31
    Date: 2021
  7. By: Ratang Sedimo; Kelesego Mmolainyane (Botswana Institute for Development Policy Analysis)
    Abstract: This study seeks to understand institutional frameworks that exist in Botswana to protect the rights of ordinary shareholders. There is no literature on the subject matter in the context of Botswana; hence this study attempts to fill in the literature gap. The study uses a variety of data collection methods, such as semi-structured interviews, the Choppies case study and lessons learnt from other jurisdictions. Findings reveal that ordinary shareholders’ rights protection involves the use of institutional frameworks. In Botswana, existing frameworks are not adequate to protect ordinary shareholders’ rights. Implementation and enforcement of legal and regulatory instruments in Botswana is weak. Furthermore, the study observed that lack of adherence to corporate governance standards created room for the expropriation of ordinary shareholders of Choppies. Learning from other jurisdictions, the study suggests a review of the institutional frameworks in Botswana with an aim to protect shareholders’ rights, more especially the ordinary shareholders’ rights.
    Keywords: Ordinary Shareholders’ Rights; Institutional Framework; Botswana
    JEL: G23 G28
    Date: 2020–03
  8. By: Marumo Omotoye (Botswana Institute for Development Policy Analysis)
    Abstract: The construction industry (CI) is considered one of the most corrupt both internationally and regionally. Therefore, this study examined the views and attitudes of professionals in Botswana’s CI towards the role whistleblowing (or protected disclosure) can play in curbing corruption in the sector. A convergent mixed methods approach was adopted. Semi-structured interviews were conducted with key stakeholders from the construction industry. Furthermore, a self-administered survey was utilised to collect quantitative data from 117 construction firms. Data revealed that there was little awareness of whistleblowing legislation. Fear of retaliation or punishment and job loss, and a lack of education on whistleblowing were identified as some of the most substantial barriers to effective whistleblowing in the industry. From a public policy perspective, it is recommended that an emphasis be placed on improving levels of education and awareness on whistleblowing in the construction sector. In addition, there should be consideration to amend the Whistleblowing Act 2016 to include construction industry regulators, the Public Procurement and Asset Disposal Board, and private media amongst the list of institutions authorised to receive reports of impropriety in order to extend the scope of legal protection to whistleblowers in the sector. Recommendations for further research are provided.
    Keywords: Whistleblowing; Construction industry; Public sector; Private sector; Botswana
    Date: 2020–03
  9. By: Jens Ludwig; Sendhil Mullainathan
    Abstract: Algorithms (in some form) are already widely used in the criminal justice system. We draw lessons from this experience for what is to come for the rest of society as machine learning diffuses. We find economists and other social scientists have a key role to play in shaping the impact of algorithms, in part through improving the tools used to build them.
    JEL: C01 C54 C55 D8 H0 K0
    Date: 2021–09

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