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on Law and Economics |
| By: | Cho, Sungwoo (UCLA); Gonçalves, Felipe (UCLA); Weisburst, Emily (University of California, Los Angeles) |
| Abstract: | Do reductions in arrests increase crime? We study line-of-duty deaths of police officers, events that likely impact police behavior through increased fear but are unlikely to directly impact civilian behavior. Officer deaths cause significant short-term reductions in all arrest types, with the largest reductions in arrests for lower-level offenses. In contrast, we find no evidence of an increase in crime or a change in victim reporting through 911 calls. There is also no apparent threshold of arrest decline beyond which crime increases. Our findings suggest that enforcement activity can be reduced at the margin without incurring public safety costs. |
| Keywords: | policing, crime, deterrence, broken windows, Ferguson effect, community trust |
| JEL: | J15 J18 K42 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14907&r= |
| By: | Ferraz, Eduardo (Universidad del Rosario); Soares, Rodrigo R. (Insper, São Paulo); Vargas, Juan (Rosario University) |
| Abstract: | Intuitively, by increasing the opportunity cost of engaging in criminal activities, positive economic shocks should reduce crime. However, the empirical evidence on the relationship between economic shocks and criminal behavior is at best ambiguous. This may be because certain types of shocks make the booty more attractive and thus constitute an incentive to predate. Beyond this basic distinction between an "opportunity cost" and a "rapacity" mechanism that may mediate the effect of economic shocks on crime, this chapter proposes a simple conceptual framework to understand this nuanced relationship. We posit that the way that economic shocks shape criminal behavior depends on three factors: i) whether the shock comes from a legal or an illegal source, ii) the extent to which the shock source is more or less lootable, and iii) the presence of contextual factors that shape the relative importance of the opportunity cost and the rapacity effect, such as the underlying level of economic inequality, the institutional strength and law enforcement capacity of the state, and whether there are instances of accelerated and hazardous economic growth that likely create social disorganization and institutional unbalance. We use this taxonomy to review the seemingly inconclusive empirical evidence, and close by highlighting current persisting puzzles as well as areas where additional research on the relationship between economic shocks and crime would be welcome. |
| Keywords: | economic shocks, crime, opportunity cost, rapacity, illegal activity, inequality, institutions, social disorganization |
| JEL: | K42 J30 D74 F16 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14954&r= |
| By: | Lauren Cohen; Bo Li |
| Abstract: | This paper documents novel evidence on the influence of political incentives in the regulatory enforcement of foreign bribery. Using exogenous variation in the timing and geographic location of U.S. Congressional elections, we find that the probability of a Foreign Corrupt Practices Act (FCPA) enforcement action against foreign firms located in the Senator’s jurisdiction increases significantly pre-election, spiking 23%, with zero equivalent move for equivalently global (but domestic-headquartered) firms in the Senator’s jurisdiction. Using hand-collected case-level data from the U.S. SEC and DOJ, we also observe larger discretion in regions where foreign firms are larger global competitors of in-state firms, operate in locally important industries, and when Senators serve as the Chairman of the Senate Judiciary Committee (which oversees the DOJ). Anti-bribery enforcement has electoral implications, leading to spikes in media coverage of the FCPA enforcement coupled with greater vote shares for the Senator. Moreover, the cases pushed through against these foreign firms just prior to elections appear to be weaker cases. The enforcements result in real effects, as in response to strategic timing in enforcement, firms reallocate business segments and sales. |
| JEL: | F13 F14 F36 F53 F55 F65 G28 G38 K22 K33 K42 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29624&r= |
| By: | Flore, Christian |
| Abstract: | This dissertation’s first subject area considers the impact of legal proceedings on corporate valuation. The first paper of this subject area analyzes the shareholder wealth effects of corporate prosecution settlements in the U.S. from 2001 to 2014. The results show that the settlement of criminal prosecution leads to positive shareholder wealth effects due to the resolution of uncertainty. Stockholders generally view the announcement of plea agreements more positively than the announcement of deferred prosecution and non-prosecution agreements. Therefore, the argument that particularly large corporations are treated preferentially and suffer comparatively less when using pretrial diversions cannot be confirmed by the empirical results. The second paper considers the reaction of banks’ stocks, bonds, and credit default swaps to the announcements of monetary penalties. From 2005 to 2015, the 25 largest global financial institutions paid combined more than $285 billion in legal penalties. A reduction in default risk and lower financing costs, as well an increase in the stock market valuation is observed, suggesting that banks benefit from settling lawsuits. Again, the positive reaction is likely driven by the resolution of uncertainty. While the sued bank’s systemic risk increases in the size of the relative monetary penalty, also positive spillover effects to other banks facing pending lawsuits with the same plaintiff are observed, demonstrating the systemic effect of law enforcement against banks. Furthermore, banks appear to correctly anticipate penalties, as they are cash flow-effective but not income-effective in the year they are announced. In the second subject area of this dissertation, the impact of self-disclosed sentiment on the stock market is investigated using the two major social media platforms Seeking Alpha (SA) and StockTwits (ST). It is found that negative self-disclosed sentiment on SA produces economically significant negative returns on the next day. In contrast, self-disclosed disagreement and positive self-disclosed sentiment on ST induce significant trading volume the next day. Both effects are predominantly driven by small stocks. The results indicate that self-disclosed sentiment is a powerful means of measurement and that the quality oriented SA is connected to stock returns while the quantity oriented ST is connected to trading activity. |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:dar:wpaper:130079&r= |
| By: | Jakub Drapal; Michal Soltes |
| Abstract: | We study the implications of the structure of criminal codes on sentencing decisions. To limit sentencing disparities, criminal codes typically divide offenses into subsections with specific sentencing ranges. The classification into corresponding subsections often depends on exceeding a given quantity threshold, such as drug amount. We study the consequences of these quantity thresholds on sentencing decisions and argue that the threshold effect can be decomposed into two opposing mechanisms: the severity mechanism and the reference one. An experiment with Czech prosecutors shows that thresholds drive substantial increases in sentences, leading to sentencing disparities. We further introduce empirical measures of (in)justice and quantify the consequences of quantity thresholds on the probability of imposing a just sentence. |
| Keywords: | sentencing; quantity threshold; sentencing disparities; |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp715&r= |
| By: | Anders Aslund |
| Abstract: | Thirty years after the collapse of the Soviet Union, it is rather clear what transition policies have worked. Almost all the post-communist countries have become market economies and have achieved macroeconomic stability. Privatization was economically necessary, and its economic outcomes have been very positive. Alas, politically, these successes have often been unsustainable because of strong popular sentiments against the private ownership of big enterprises. Substantial renationalization has occurred. What went wrong? How could privatization be done better, or be defended? What should be done to defend private enterprise in the future? This paper argues that the nature of privatization is far less important than the establishment of good rule of law so that private property rights can be defended. |
| Keywords: | Eastern Europe, former Soviet Union, post-communist transformation, market economy, privatization |
| JEL: | P20 P26 P30 P31 K00 K42 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:sec:worpap:0016&r= |
| By: | Florian Exler; Igor Livshits; James MacGee; Michele Tertilt |
| Abstract: | Do cognitive biases call for regulation to limit the use of credit? We incorporate over-optimistic and rational borrowers into an incomplete markets model with consumer bankruptcy. Over-optimists face worse income risk but incorrectly believe they are rational. Thus, both types behave identically. Lenders price loans forming beliefs—type scores—about borrower types. This gives rise to a tractable theory of type scoring. As lenders cannot screen types, borrowers are partially pooled. Over-optimists face cross subsidized interest rates but make financial mistakes: borrowing too much and defaulting too late. The induced welfare losses outweigh gains from cross subsidization. We calibrate the model to the U.S. and quantitatively evaluate policies to address these frictions: financial literacy education, reducing default cost, increasing borrowing costs, and debt limits. While some policies lower debt and filings, only financial literacy education eliminates over borrowing and improves welfare. Score-dependent borrowing limits can reduce financial mistakes but lower welfare. |
| Keywords: | Consumer Credit; Over-Optimism; Financial Mistakes; Bankruptcy; Default; Financial Literacy; Financial Regulation; Type Score; Cross-Subsidization |
| JEL: | E21 E49 G18 K35 |
| Date: | 2021–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:93457&r= |
| By: | Nedyalkova, Plamena; Dimitrova, Darina; Bogdanov, Hristosko |
| Abstract: | This chapter examines the legal and financial control issues regarding compliance with labor legislation. On the one hand, the legal analysis shows that legislation is one of the main factors influencing the financial control practice for compliance with labour legislation. On the other hand, the problems and specifics of the control procedures applied by the General Labor Inspectorate Executive Agency in Bulgaria are presented. The overall inspection process is presented sequentially, analyzing the individual stages that the control procedures go through. The problems and the specifics of carrying out an independent inspection activity by the agency are presented, and the peculiarities of carrying out joint control activities with executive bodies or their administrative structures by the specialized administration are examined. Different types of factors that influence the implementation of control procedures by the General Labor Inspectorate Executive Agency in Bulgaria are considered. |
| Keywords: | administrative law, labour legislation, control, factor analysis |
| JEL: | K23 M4 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111093&r= |
| By: | Vazquez, Antonio B. (Mistra Center for Sustainable Markets (Misum)); Martinez, Sofia (Stockholm School of Economics) |
| Abstract: | We examine the effects of an ESG reporting mandate on firms’ corporate performance. Exploiting discontinuous ESG reporting requirements assigned to otherwise similar small and large-sized private firms, we document that ESG reporting increases firms’ corporate performance. Our evidence suggests that the mandate helps firms establishing a credible commitment with employees and customers, which allows them to enjoy higher performance. Our results are robust to a matched sample, a mixed difference-in-differences and regression discontinuity setting and to the use of alternative thresholds of ESG reporting. We contribute to the literature by providing evidence that suggests private firms benefit from reporting non-financial information. |
| Keywords: | private firms; mandatory ESG reporting; regression discontinuity design; difference-in-differences design |
| JEL: | G38 K22 M14 M41 M48 |
| Date: | 2022–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:hamisu:2022_005&r= |
| By: | SANCHEZ FERNANDEZ Berta (European Commission - JRC); DI BARTOLO Fabiola (European Commission - JRC); KAMMENOU Maria; SCALIA Rosalinda; SOTO EMBODAS Iria (European Commission - JRC); BARREIRO HURLE Jesus (European Commission - JRC) |
| Abstract: | This report constitutes a technical analysis of the responses to the phytosanitary certificate (PC) questionnaire concerning import measures under the new Plant health Legislation as provided by several stakeholders. The questionnaire - sent in February 2021 - was answered by 126 respondents including National Plant Protection Organizations (NPPOs), certification Competent Authorities, operators, associations, and the general public in 24 different EU Member States, and NPPOs in 24 different non-EU countries. This report is an analysis of policy aspects related to the effectiveness and enforcement of the import measures addressed in the questionnaire, carried out by DG SANTE, and a cost benefit analysis of those measures carried out by the JRC. Results show the stakeholders’ views on the costs and benefits of the extension of the PC requirement to cover newly regulated commodities [Regulation (EU) 2019/2072]. The results also include the evaluation of other relevant policy aspects and alternatives as perceived by the stakeholders – the possibility of PC exemption for more commodities, the possibility of using the CHED-PP (Common Health Entry Document-Plant Products) for the newly regulated commodities, the electronic certification, and the certification use in e-commerce. This report is one of four reports drafted for the preparation of the report to the European Parliament and to the Council according to the legislative obligation of the Commission laid down in Article 50 of the Plant Health Regulation (EC 2016/2031). |
| Keywords: | Phytosanitary certificate, Cost benefit analysis, Plant Health, EU Regulation, Import measures |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc126695&r= |