nep-law New Economics Papers
on Law and Economics
Issue of 2022‒05‒16
ten papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. School Indiscipline and Crime By Tony Beatton; Michael P. Kidd; Matteo Sandi
  2. Mountains of Evidence: The Effects of Abnormal Air Pollution on Crime By Birzhan Batkeyev; David R. DeRemer
  3. Legal Representation in Disability Claims By Hilary W. Hoynes; Nicole Maestas; Alexander Strand
  4. Less Cash, Less Theft? Evidence from Fintech Development in the People’s Republic of China By Jiang, Hongze; Liang, Pinghan
  5. Do sentencing guidelines result in lower inter-judge disparity ? Evidence from framed field experiment By Cécile Bourreau-Dubois; Myriam Doriat-Duban; Bruno Jeandidier; Jean Ray
  6. Collusion by Algorithm: The Role of Unobserved Actions By Simon Martin; Alexander Rasch
  7. The rule of law and investment in intangible capital: Evidence for the EU-16, 1996-2017 By Roth, Felix
  8. Doubling Back on Double Marginalization By Laurent Linnemer
  9. Giving zombie firms a second chance: An assessment of the reform of the Portuguese insolvency framework By Ernesto Nieto Carrillo; Carlos Carreira; Paulino Maria Freitas Teixeira
  10. Fare Evasion and Monopoly Regulation By Martin Besfamille; Nicolás Figueroa; León Guzmán

  1. By: Tony Beatton; Michael P. Kidd; Matteo Sandi
    Abstract: This paper studies the impact of compulsory schooling on in-school violence using individual-level administrative data matching education and criminal records from Queensland. Exploiting a dropout age reform in 2006, it defines a series of regression-discontinuity specifications. While police records show that property and drug offences decrease, education records indicate that in-school violence increases. Effects concentrate among students with prior criminal records and their classmates, with greater exposure to in-school violence leading to increased criminality at older ages. Dropout age reforms may alter the school environment and prior studies that fail to consider in-school behaviour may over-estimate their short-run crime-reducing impact.
    Keywords: youth crime, minimum dropout age, school attendance
    JEL: I20 K42
    Date: 2022
  2. By: Birzhan Batkeyev (International School of Economics, Kazakh-British Technical University); David R. DeRemer (Nazarbayev University, Graduate School of Business)
    Abstract: This is the first study to assess that air pollution increases criminal activity in a city with air pollution regularly exceeding international safety standards. For winter in Almaty, Kazakhstan, we collect data on crime and PM2.5 pollution across city districts over 8-hour intervals. Our identification strategy employs distinctive features of Almaty's geography: the proximity of some districts to mountain winds and the high frequency of temperature inversions. Using a PPML control function approach, we estimate a PM2.5 elasticity of the expected crime rate equal to 0.38, more than four times as large as elasticity estimates from studies of cleaner cities. Our data and empirical setting also facilitate our identification of air pollution effects on particular crime types. We find that air pollution increases robbery and high-stakes property crime more than low-stakes property crime. These new results support the theory that air pollution induces disregard for criminal consequences and bring further evidence that air pollution induces aggression.
    Keywords: Abnormal Air Pollution, PM2.5, Criminal Activity
    JEL: K42 Q50 Q53
    Date: 2022–04
  3. By: Hilary W. Hoynes; Nicole Maestas; Alexander Strand
    Abstract: Legal representatives play a prominent role in the Social Security Disability Insurance adjudication process, earning fees totaling $1.2 billion in 2019. Long ubiquitous in appellate hearings, disability representatives—including attorneys and non-attorneys—have begun appearing more frequently at the beginning of cases, during the initial review. This development has raised questions about the motives of disability law firms, who are sometimes perceived to prioritize their own interests in response to incentives in the fee structure set by the Social Security Administration. We provide the first estimates of the causal impact of legal representation on case outcomes when representatives are engaged from the initial stage. To address selection into representation, we instrument for initial representation using geographic and temporal variation in disability law firm market shares in the closely related but distinct appellate market. We find that representation increases the probability of initial awards, reduces the probability of appeals, and induces no detectable change in the ultimate probability of award. This pattern indicates that legal representation in the initial stage leads to earlier disability awards to individuals who would otherwise be awarded benefits only on appeal. Furthermore, by securing earlier awards and discouraging unsupported appeals, representation reduces total case processing time by nearly one year.
    JEL: H55 J14 K15
    Date: 2022–03
  4. By: Jiang, Hongze (Asian Development Bank Institute); Liang, Pinghan (Asian Development Bank Institute)
    Abstract: We investigate the impact of fintech development on an important type of crime: theft. Based on Becker’s rational criminal theory, we suggest that fintech development could mitigate theft activities by increasing the earnings from legitimate work, relaxing potential criminals’ financial constraints, and reducing the expected gains from theft. We established a unique dataset containing information on more than 1 million theft defendants during the period 2014–2018, which we extracted from 874,000 judgment statements. Then, we aggregated them to construct a city-year panel of theft activities and matched it with the city-level economic activities and Fintech development level. The results show that a 1 standard deviation increase in the fintech development level has a significant association with a 0.39 standard deviation decrease in thefts’ density. Robustness checks and instrumental variable estimation support the main results. Further, the development of fintech reduces the density of thefts by reducing residents’ cash holding and providing more job opportunities. Finally, we utilized a nationally representative household survey to estimate the cost of theft for households, finding that victims suffer from more mental health problems, increasing their health expenditure. Our results suggest an unexpected source of welfare gain from the development of fintech: an improvement in public security.
    Keywords: fintech; theft; crime; People’s Republic of China
    JEL: C81 G59 K14 K42
    Date: 2021–08
  5. By: Cécile Bourreau-Dubois (BETA - Bureau d'Économie Théorique et Appliquée - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Myriam Doriat-Duban (BETA - Bureau d'Économie Théorique et Appliquée - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Bruno Jeandidier (BETA - Bureau d'Économie Théorique et Appliquée - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Jean Ray (BETA - Bureau d'Économie Théorique et Appliquée - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: We study decision-making of judges in an experimental settingresembling real world judicial decision making. We gave to 312 future judges 48 vignettes built from real datarelated to divorce cases involving children. We compare two different subject pools : judges who were asked to set child support awards with a guideline and judges who were asked to set child support awards without any guideline. We found that the introduction of a guideline contributes to reduce the disparity between judges (i.e. the variance for like cases is lower when the subjects have the opportunity to use the guideline) but this effect is not systematic, an increase in heterogeneity being observed for some specific cases.
    Keywords: Controlled experiment,Field experiment,Judicial sentencing,Child support
    Date: 2020–10–26
  6. By: Simon Martin; Alexander Rasch
    Abstract: We analyze the effects of better algorithmic demand forecasting on collusive profits. We show that the comparative statics crucially depend on the whether actions are observable. Thus, the optimal antitrust policy needs to take into account the institutional settings of the industry in question. Moreover, our analysis reveals a dual role of improving forecasting ability when actions are not observable. Deviations become more tempting, reducing profits, but also uncertainty concerning deviations is increasingly eliminated. This results in a u-shaped relationship between profits and prediction ability. When prediction ability is perfect, the ‘observable actions’ case emerges.
    Keywords: algorithm, collusion, demand forecasting, unobservable actions, secret price cutting
    JEL: L41 L13 D43
    Date: 2022
  7. By: Roth, Felix
    Abstract: This paper analyses the relationship between the rule of law (RoL) and intangible capital investment by businesses within a sample of 16 European countries, over the period from 1996 to 2017. Studies on the effects of RoL on intangible capital investment are scarce, hence, the relevance of empirical research in this area. When controlling for endogeneity, the study found a coefficient of 2.0 for the relationship between RoL and investment in intangibles, confirming the significant and positive relationship between the two and highlighting RoL as a driving factor of investment in intangibles and, hence, labour productivity growth in the EU-16.
    Keywords: rule of law (RoL),intangible capital investment,labour productivity growth,European Union (EU)
    JEL: E02 E22 O34 O43 O52 P14
    Date: 2022
  8. By: Laurent Linnemer
    Abstract: “Double marginalization” and “Elimination of Double marginalization” are catch-phrases commonly used in the IO literature. In this note, I trace back the origin of the idea to Chapter IX, on complementary goods monopolies, of Cournot (1838). Through the years Cournot’s contribution remained a reference but ended being viewed as a special case of the bilateral monopoly model. Yet, it is worth wondering why the most cited paper on this issue is nowadays Spengler (1950) which contains only an informal treatment of the question. In addition to retracing the origin of the idea, I emphasize the elegant proof of Cournot for the simultaneous game and extend it to the sequential game. I also show that prices are usually higher in the sequential game but that they could be lower if demand is very convex.
    Keywords: Cournot, complements, successive monopolies
    JEL: B16 B21 K21 L12 L13 L42
    Date: 2022
  9. By: Ernesto Nieto Carrillo (Ph.D. Student at Faculty of Economics, University of Coimbra); Carlos Carreira (University of Coimbra, Centre for Business and Economics Research, CeBER and Faculty of Economics); Paulino Maria Freitas Teixeira (University of Coimbra, Centre for Business and Economics Research, CeBER and Faculty of Economics)
    Abstract: In most advanced economies productivity growth has been hampered by barriers that allow zombie firms to survive. We examine the effectiveness of institutional reforms in Portugal that were aimed to improve efficiency in insolvency framework. Estimates show that reallocation barriers declined. The reforms appear to have larger and more effective results in zombie recovery than in exit. Firm size plays a major role in tackling zombie-entrenchment. The decline in barriers has also implied a lower distortion in the economy-wide selection process. The new setting seems to be more desirable than forcing zombie exit at all costs.
    Keywords: Insolvency regimes; Zombie firms; Productivity; Reallocation barriers; Firm exit;Restructuring.
    JEL: D24 G32 G33 K22 L25 O47
    Date: 2022–01
  10. By: Martin Besfamille; Nicolás Figueroa; León Guzmán
    Abstract: We consider the regulation of a monopoly facing consumers that may evade payments, an important issue in public utilities. To maximize total surplus, the regulator sets the price and socially costly transfers, ensuring that the monopoly breaks-even. With costly effort, the firm can deter evasion. Under unit demand and fixed quality, price is independent of marginal cost, but increasing in the marginal cost of public funds. When quality is endogenous, we find sufficient conditions that imply a non-monotonic relation between price and marginal cost of public funds. We extend the model to consider non-unit demand and moral hazard.
    Keywords: regulation, natural monopoly, evasion, marginal cost of public funds
    JEL: D42 H20 L43 L51
    Date: 2022

This nep-law issue is ©2022 by Eve-Angeline Lambert. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.