nep-law New Economics Papers
on Law and Economics
Issue of 2022‒01‒24
fifteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Discontinuities in the Age-Victimization Profile and the Determinants of Victimization By Bindler, Anna; Hjalmarsson, Randi; Ketel, Nadine; Mitrut, Andreea
  2. Miscarriage of Justice in Judges' Mind: Theory and Experimental Evidence By Stefania Ottone; Ferruccio Ponzano; Margherita Saraceno; Luca Zarri
  3. Specialized Courts and the Reporting of Intimate Partner Violence: Evidence from Spain By Garcia-Hombrados, Jorge; Martínez Matute, Marta
  4. Women Who Are Mad By Sanchez Marrugo, Betshy Paola
  5. Covid, work-from-home, and securities misconduct By Cumming, Douglas J.; Firth, Christopher; Gathergood, John; Stewart, Neil
  6. Mortgage-Related Bank Penalties and Systemic Risk among U.S. Banks By Václav Brož; Evžen Kocenda
  7. Commitments and the Marital Match: The Effect of Alimony Reform on Assortative Matching By Fernández-Kranz, Daniel; Roff, Jennifer Louise
  8. Peltzman Revisited: Quantifying 21st Century Opportunity Costs of FDA Regulation By Casey B. Mulligan
  9. No taxation without property rights: Formalization of property rights on land and tax revenues from individuals in sub-Saharan Africa By Marina Nistotskaya; Michelle D'Arcy
  10. New Forms of Tax Competition in the European Union: an Empirical Investigation By Eloi Flamant; Sarah Godar; Gaspard Richard
  11. Tax Reform and Tax Compliance Behaviour of Companies in Nigeria By Okeke, Clement Ejiofor; Saluadeen, Yinka Mashood
  12. The causal effect of partial retirement on older workers’ labor force participation By Rebecca Schrader
  13. More Reviews May Not Help: Evidence from Incentivized First Reviews on Airbnb By Andrey Fradkin; David Holtz
  14. Risk-Taking under Limited Liability: Quantifying the Role of Motivated Beliefs By Ciril Bosch-Rosa; Daniel Gietl; Frank Heinemann
  15. Human development and governance in Africa: do good fences make good neighbours? By Simplice A. Asongu; Samba Diop

  1. By: Bindler, Anna (University of Gothenburg); Hjalmarsson, Randi (University of Gothenburg); Ketel, Nadine (Vrije Universiteit Amsterdam); Mitrut, Andreea (University of Gothenburg)
    Abstract: Many rights are conferred on Dutch youth at ages 16 and 18. Using national register data for all reported victimizations, we find sharp and discontinuous increases in victimization rates at these ages: about 13% for both genders at 16 and 9% (15%) for males (females) at 18. These results are comparable across subsamples (based on socio-economic and neighborhood characteristics) with different baseline victimization risks. We assess potential mechanisms using data on offense location, cross-cohort variation in the minimum legal drinking age driven by a 2014 reform, and survey data of alcohol/drug consumption and mobility behaviors. We conclude that the bundle of access to weak alcohol, bars/clubs and smoking increases victimization at 16 and that age 18 rights (hard alcohol, marijuana coffee shops) exacerbate this risk; vehicle access does not play an important role. Finally, we do not find systematic spillover effects onto individuals who have not yet received these rights.
    Keywords: victimization, crime, youth, youth protection laws, alcohol, inequality, RDD
    JEL: K42 K36 J13 I12 I14
    Date: 2021–12
  2. By: Stefania Ottone (University of Milan Bicocca); Ferruccio Ponzano (University of Eastern Piedmont); Margherita Saraceno (University of Pavia); Luca Zarri (Department of Economics (University of Verona))
    Abstract: In this paper, we investigate – both theoretically and by means of a controlled lab experiment – judges’ decisions when either “type-I” errors (i.e. convicting an innocent defendant) or “type-II” errors (i.e. acquitting a guilty defendant) can occur. Addressing this issue with field data is extremely challenging. Taken together, our findings indicate that participants are sensitive to both types of error, rather than to type-I avoidance only. Next, in both scenarios we interestingly detect “compensatory leniency” in judicial decision making, with participants seeming to balance the inherent trade-off between the errors by jointly managing the two key levers they are provided wiggle room on by our design: decision over (i) conviction/acquittal and (ii) severity of punishment. Finally, we show that participants are willing to pay to get further evidence and eliminate both type-I and type-II errors. We discuss implications of our core results for the design of behaviorally informed deterrence policies.
    Keywords: Judicial Errors, Miscarriage of Justice, Economic Experiments, Law and Economics
    JEL: K42 K49 C91
    Date: 2022–01
  3. By: Garcia-Hombrados, Jorge (Universidad Autónoma de Madrid); Martínez Matute, Marta (Universidad Autónoma de Madrid)
    Abstract: This paper assesses the effect of the creation of specialized intimate partner violence (IPV) courts on the reporting and incidence of these crimes. To achieve this goal, we exploit the sequential roll-out of specialized IPV courts throughout Spain by applying a difference-in-differences strategy over a sample of treatment and matched control districts. We find that the opening of a specialized IPV court decreases time to disposition of IPV cases by 61% and increases the reporting of IPV in the judicial district by approximately 22%. However, we do not see any effect of the courts on the incidence of IPV homicides, neither on the reported number of aggravated IPV offenses, for which misreporting is arguably smaller. The latter results suggest that despite the positive effects on the reporting of less severe IPV offenses, the creation of these courts failed to reduce the incidence of the most severe IPV offenses within the time period studied.
    Keywords: intimate partner violence, reporting of intimate partner violence, specialized intimate-partner violence courts
    JEL: J12 J16 K14 K38
    Date: 2021–12
  4. By: Sanchez Marrugo, Betshy Paola
    Abstract: De facto and de jure social injustices are an expression of the id quo. These impulses have a detrimental effect on women’s daily lives, making it a lot more difficult for them to enjoy their human rights. This document has shared data particles of knowledge about current injustices occurring to ‘mad’ and ‘intersectional’ women in the UK, the psychological impact of these injustices (e.g. Borderline Personality Disorder), and the legal framework of international law, which the UK is subject to. De jure and de facto injustices exacerbate mental health problems, and lead to the introjection of maladaptive behaviours, and can corrupt the individual superego. Furthermore, UN Women (2016) recommends that all countries take on board the Istanbul Convention, and the UK is a country member of the UN Security Council. The UK’s Domestic Abuse Act 2021 does not fully cover all the criteria necessary for the prevention and protection of women’s rights, as well as the prosecution of perpetrators of violence against women. Similarly, the Equality Act 2010 only protects some of the many characteristics that elicit discrimination against human beings, and the word ‘dignity’ does not appear once in the Human Rights Act 1998. This seemingly innocuous semantic exception is a malpraxis. All these technical legislative failures lead to very costly consequences for the least advantaged in the status quo. The facts and figures have shown that women in the mental health sector are the most affected group, out of which patients with BPD tend to struggle the most with daily attitudinal obstacles, intersectional discrimination, and de facto impediments.
    Keywords: Forensic psychology, human rights, violence against women
    JEL: I31
    Date: 2021–12–27
  5. By: Cumming, Douglas J.; Firth, Christopher; Gathergood, John; Stewart, Neil
    Abstract: We consider whether traders are more likely to commit securities violations when trading at home, a new form of working induced by the Covid pandemic. We examine data pre- and post-Covid, during which some traders were unexpectedly forced to work at home. The data indicate the presence of both a treatment and a selection effect, where work at home exhibits fewer misconduct cases. Work at home is associated with fewer cases of trading misconduct, although no difference in communications misconduct. The economic significance of working from home on trading misconduct is large for both the treatment and selection effects.
    Keywords: Market Manipulation,Trading,Surveillance,Securities Regulation
    JEL: G12 G14 G18 K22
    Date: 2021
  6. By: Václav Brož; Evžen Kocenda
    Abstract: We analyze link between mortgage-related regulatory penalties levied on banks and the level of systemic risk in the U.S. banking industry. We employ a frequency decomposition of volatility spillovers (connectedness) to assess system-wide risk transmission with short-, medium-, and long-term dynamics. We find that after the possibility of a penalty is first announced to the public, long-term systemic risk among banks tends to increase. From the dynamic perspective, bank penalties represent an overlooked risk as they do not increase systemic risk immediately, but the risk accumulates and propagates over the long-term. In this respect, bank penalties resemble still waters that run deep. In contrast, a settlement with regulatory authorities leads to a decrease in the long-term systemic risk. Our analysis is robust with respect to a number of relevant criteria.
    Keywords: bank, global financial crisis, mortgage penalty, systemic risk, financial stability
    JEL: C14 C58 G14 G21 G28 K41
    Date: 2021
  7. By: Fernández-Kranz, Daniel (IE Business School, Madrid); Roff, Jennifer Louise (Queens College, CUNY)
    Abstract: This paper examines the effects of reforms that reduced alimony on matching in the marriage market. Recent literature indicates that divorce law changes which reduce commitment or income-sharing upon separation will lead to an increase in assortative matching, as women forgo specialization which may not be compensated upon divorce. Using state-level data on alimony reform that reduced the entitlements of eligible spouses and American Community Survey data on marriage and the characteristics of newlyweds, we find that alimony reform increased measures of spousal covariance in education. Our results indicate that correlation coefficients on spousal degree attainment consistently rise with alimony reform, and regression-based measures of assortative matching increase similarly. Moreover, we find the largest effects among those groups who might be more sensitive to the reform. Regression-based measures of assortative matching increase by over 10% among couples in which at least one partner had previously been married and by 9% among those couples who marry in states with less generous property division and child support which are often treated as substitutes for alimony in divorce settlements.
    Keywords: marriage, matching, divorce law, alimony, assortative matching, commitment mechanisms
    JEL: J12 K12
    Date: 2021–11
  8. By: Casey B. Mulligan
    Abstract: This paper revisits Peltzman (1973) in light of two recent opportunities to quantitatively assess tradeoffs in drug regulation. First, reduced regulatory barriers to drug manufacturing associated with the 2017 reauthorization of Generic Drug User Fee Amendments were followed by significantly more entry and lower consumer prices for prescription drugs. Using a simple and versatile industry model and historical data on entry, I find that easing generic restrictions discourages innovation, but this welfare cost is more than offset by consumer benefits from enhanced competition, especially after 2016. Second, accelerated vaccine approval in 2020 had unprecedented net benefits as it not only improved health but substantially changed the trajectory of the wider economy. The evidence suggests that cost-benefit analysis of FDA regulation is incomplete without accounting for substitution toward potentially unsafe and ineffective treatments that are both outside FDA jurisdiction and heavily utilized prior to FDA approval. Moreover, the policy processes initiating these 21st century regulatory changes show a clear influence of Peltzman’s 1973 findings.
    JEL: I18 L51 L65 O31
    Date: 2021–12
  9. By: Marina Nistotskaya; Michelle D'Arcy
    Abstract: The arguments that property rights and taxation positively affect development are well established in separate literatures, but the link between property rights and taxation is under-studied. To address this gap, we theorize that formalization of individual property rights facilitates economic exchange at scale, providing a viable opportunity for individuals to improve their economic standing, in exchange for which property owners assent to pay taxes. We illustrate the argument by comparing the historical evolution of tax states in early modern Europe and colonial Africa.
    Keywords: Property rights, Taxation, Sub-Saharan Africa, Afrobarometer
    Date: 2021
  10. By: Eloi Flamant (EU Tax - EU Tax Observatory); Sarah Godar (EU Tax - EU Tax Observatory); Gaspard Richard (EU Tax - EU Tax Observatory)
    Abstract: This report provides an empirical analysis of personal and corporate tax competition in the European Union. We find that tax competition increasingly takes the form of preferential or narrowly targeted tax regimes on top of general rate cuts. We provide a ranking of the most harmful regimes targeting foreign, primarily highincome or high-wealth individuals. We also discuss several options to address these trends. The evolution of tax competition in the European Union may be summarized as follows. While corporate tax rates are still on a downward trend, the decline of top statutory personal income tax rates has stopped since the financial crisis of 2008–2009. In the meantime, many new preferential regimes have been introduced into the personal income tax systems of member states. Many base-narrowing measures also contribute to lowering corporate tax burdens. By targeting the most mobile parts of the tax base - high-income earners and multinational enterprises - these tax incentives undermine effective revenue collection in the European Union and weaken the horizontal and vertical equity of tax systems. The most striking trend in EU tax competition is the increase in the number of personal income tax schemes targeting foreign individuals. The number of such regimes has increased from 5 in 1995 to 28 today. A tentative ranking suggests that the most harmful ones are the Italian and Greek high-net-worth individual regimes, Cyprus' high-income regime and the pension regimes of Cyprus, Greece and Portugal. These regimes exhibit long periods of duration, provide significant tax advantages, specifically target very high-income individuals or do not require any real economic activity in a given member state. At present, preferential regimes apply to over 200,000 beneficiaries. A lower-bound estimation suggests that the total fiscal costs for the European Union amount to EUR 4.5 billion per year. This sum is equivalent e.g. to the annual budget of the entire Erasmus programme. Member states also apply numerous base-narrowing measures which have the potential to significantly lower the effective tax rate of multinationals. Public financing of corporate research and development has increased in recent decades and has increasingly taken the form of tax incentives. A total of 14 intellectual property regimes in the EU are currently designed to tax income associated with patents, software and similar intangible assets at rates of 15% or less (10% or less in half of these cases). Six countries have adopted regimes of notional interest deduction; the Maltese and Cypriot regimes seem exceptionally generous. Approximately 1,348 unilateral tax rulings concerning multinationals' tax arrangements were in force in 2019. The implications of these rulings for revenue collection are still unknown to the public. The trends uncovered by this report may be addressed in several ways, e.g. by reforming the Code of Conduct and transforming it into a binding instrument – and extending its mandate to personal income taxation as well as to non-preferential corporate tax regimes that lead to generally low levels of taxation of multinationals. In the absence of a coordinated approach (which is always the ideal solution), member states might consider unilaterally taxing their expatriates, which, under some conditions, may mitigate the effects of preferential personal income tax regimes. A comprehensive implementation of the global corporate minimum tax agreed in October 2021, with minimal carveouts and limited deductions for research and development, could provide an effective floor for the EU's race to the bottom in corporate taxation.
    Date: 2021–12
  11. By: Okeke, Clement Ejiofor; Saluadeen, Yinka Mashood
    Abstract: This paper evaluates the 2007 Company Income Tax (CIT) Reform with respect to improving the tax compliance behaviour of companies in Nigeria. Data for total annual company income tax paid and the total GDP for the respective years of the study were extracted from National Bureau of Statistics records. The study covers a period of twenty years (ten years, 1997-2006 before and ten years, 2008-2017 after the reform). The Wilcoxon Rank Sum Test was used as analysis tool. The study finds companies to be more complaint after the reform than before. The study recommends further reforms in terms of increase in the level of incentives to companies to enhance tax compliance.
    Keywords: Compliance Behaviour, Tax Reform, Political Support, Fiscal Contract Enforcement
    JEL: G38 H3 K34
    Date: 2021–10–22
  12. By: Rebecca Schrader
    Abstract: In this study, I investigate the effect of partial retirement at the firm level on older workers’ labor participation. Thereby, I contribute to the controversial debate about the effects of partial retirement. Using detailed administrative employer-employee data from Germany, I exploit the introduction of partial retirement options in Germany related to the law on PR of 1996 within a difference-in-differences framework. My results show that older workers’ labor participation responds to the introduction of partial retirement and reveals substantial effect heterogeneities with regard to the specific partial retirement arrangement. Overall, I find evidence that partial retirement has the potential to extend older workers’ labor participation and thereby to serve as an instrument to lower the financial burden of governments struggling with the economic costs of demographic aging.
    Keywords: older workers, partial retirement, retirement decision, difference-in-differences
    JEL: J14 J22 J26
    Date: 2021–12
  13. By: Andrey Fradkin; David Holtz
    Abstract: Online reviews are typically written by volunteers and, as a consequence, information about seller quality may be under-provided in digital marketplaces. We study the extent of this under-provision in a large-scale randomized experiment conducted by Airbnb. In this experiment, buyers are offered a coupon to review listings that have no prior reviews. The treatment induces additional reviews and these reviews tend to be more negative than reviews in the control group, consistent with selection bias in reviewing. Reviews induced by the treatment result in a temporary increase in transactions but these transactions are for fewer nights, on average. The effects on transactions and nights per transaction cancel out so that there is no detectable effect on total nights sold and revenue. Measures of transaction quality in the treatment group fall, suggesting that incentivized reviews do not improve matching. We show how market conditions and the design of the reputation system can explain our findings.
    Date: 2021–12
  14. By: Ciril Bosch-Rosa; Daniel Gietl; Frank Heinemann
    Abstract: This paper investigates whether limited liability and moral hazard affect risk-taking through motivated beliefs. On the one hand, limited liability pushes investors towards taking excessive risks. On the other, such excesses make it hard for investors to maintain a positive self-image when moral hazard is present. Using a novel experimental design, we show that subjects form motivated beliefs to self-justify their excessive risk-taking. For the same investment opportunity, subjects invest more and are significantly more optimistic about the success of the investment if their failure can harm others. We show that more than one third of the investment increase under limited liability can be explained through motivated beliefs. Moreover, using a treatment with limited liability but no moral hazard, we show that motivated beliefs are formed subconsciously and can lead to the paradoxical result of investors taking larger risks when their investment can harm a third party than when it cannot. These results underscore the importance of motivated beliefs in regulatory policy as they show that one should target not only bad incentives but also “bad beliefs.”
    JEL: C91 D84 G11 G41
    Date: 2021
  15. By: Simplice A. Asongu (Yaounde, Cameroon); Samba Diop (Alioune Diop University, Bambey, Senegal)
    Abstract: In this paper, we revisit the relationship between governance and human development in Africa during the period 2010-2019 taking into account the existence of spatial dependence and controlling the endogeneity problem through a Generalized Spatial Two Stage Least Squares (2SLS). The exploratory spatial data analysis reveals the existence of spatial dependence of human development and governance quality. Our empirical findings support that in Africa, “good fences make good neighbours†or proximity matters in the distribution of human development. Implications are discussed.
    Keywords: Governance, human development, Africa
    JEL: D31 I10 I32 K40 O55
    Date: 2021–01

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