nep-law New Economics Papers
on Law and Economics
Issue of 2022‒05‒30
twelve papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Cognitive behavior therapy reduces crime and violence over 10 years: Experimental evidence By Christopher Blattman; Sebastian Chaskel; Julian C. Jamison; Margaret Sheridan
  2. The response of illegal mining to revealing its existence By Saavedra, Santiago
  3. Fair Governance with Humans and Machines By Yoan Hermstrüwer; Pascal Langenbach
  4. How (Not) to Purchase Novel Goods and Services: Specific Performance Versus At-Will Contracts By Schmitz, Patrick W.
  5. The Origins of Elite Persistence: Evidence from Political Purges in post-World War II France By Toke S. Aidt; Jean Lacroix; Pierre-Guillaume Méon
  6. Defining and contextualising regulatory oversight and co-ordination By Andrea Renda; Rosa Castro; Guillermo Hernández
  7. How Does Party Discipline Affect Legislative Behavior? Evidence from Within-Session Variation in Lame Duck Status By Jon H. Fiva; Oda Nedregård
  8. Institutional protection schemes: What are their differences, strengths, weaknesses, and track records? By Haselmann, Rainer; Krahnen, Jan Pieter; Tröger, Tobias; Wahrenburg, Mark
  9. The future of European fiscal governance: a comprehensive approach By Marzia Romanelli; Pietro Tommasino; Emilio VadalÃ
  10. Social protection legislative frameworks in South Asia from a children's rights perspective By Luca Lazzarini
  11. May The Forcing Be With You: Experimental Evidence on Mandatory Contributions to Public Goods By P. Battiston; L. Chollete; S. Harrison
  12. Gender wage and longevity gaps and the design of retirement systems By Francesca Barigozzi; Helmuth Cremer; Jean-Marie Lozachmeur

  1. By: Christopher Blattman (Department of Political Science, University of Chicago); Sebastian Chaskel (Instiglio); Julian C. Jamison (Department of Economics, University of Exeter); Margaret Sheridan (Department of Psychology and Neuroscience, University of North Carolina)
    Abstract: In most societies, a small number of people commit most of the serious crimes and violence. Short-term studies have shown that cognitive behavioral therapy (CBT) can reduce such antisocial behaviors. There are some signs that these behavior changes may be temporary, however, especially from therapy on its own. This is unsettled, however, for there has been little randomized and long-term research on the question. We follow 999 high-risk men in Liberia 10 years after randomization into one of four arms: 8 weeks of a low-cost therapy; a $200 cash grant; both therapy and cash; or a control group. Together, the two interventions cost just $530 to deliver. We find that, a decade later, both therapy alone and therapy with economic assistance produce dramatic reductions in antisocial behaviors. Reported drug-selling and participation in thefts and robberies, for example, fall by about half. These impacts are greatest among the very highest-risk men. The effects of therapy alone, however, are somewhat smaller and more fragile. The effects of therapy plus economic assistance are more sustained and precise. Since the cash did not increase earnings for more than a few months after the grants, we hypothesize that the grant, and those few months of legitimate business activity, reinforced the learning-by-doing and habit formation embodied in CBT. Overall, the results suggest that highly-targeted CBT plus economic assistance could be an inexpensive and effective way to prevent violence, especially when policymakers are searching for alternatives to aggressive policing and incarceration.
    Keywords: cognitive behavior therapy, cash transfers, crime, violence, mental health, Africa, field experiments
    JEL: K42 O15 O17 D83
    Date: 2022–05–11
  2. By: Saavedra, Santiago
    Abstract: New monitoring technologies can help curb illegal activities by reducing information asymmetries between enforcing and monitoring government agents. I created a novel dataset using machine learning predictions on satellite imagery that detects illegal mining. Then I disclosed the predictions to government agents to study the response of illegal activity. I randomly assigned municipalities to one of four groups: (1) information to the observer (local government) of potential mine locations in his jurisdiction; (2) information to the enforcer (National government) of potential mine locations; (3) information to both observer and enforcer, and (4) a control group, where I informed no one. The effect of information is relatively similar regardless of who is informed: in treated municipalities, illegal mining is reduced by 11\% in the disclosed locations and surrounding areas. However, when accounting for negative spillovers --- increases in illegal mining in areas not targeted by the information --- the net reduction is only 7\%. These results illustrate the benefits of new technologies for building state capacity and reducing illegal activity.
    Keywords: Illegal mining; Monitoring Technology; Colombia
    JEL: H26 K42 O13 O17 Q53
    Date: 2022–05
  3. By: Yoan Hermstrüwer (Max Planck Institute for Research on Collective Goods, Bonn); Pascal Langenbach (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: How fair are government decisions based on algorithmic predictions? And to what extent can the government delegate decisions to machines without sacrificing procedural fairness? Using a set of vignettes in the context of predictive policing, school admissions, and refugee-matching, we explore how different degrees of human-machine interaction affect fairness perceptions an procedural preferences. We implement four treatments varying the extent of responsibility delegation to the machine and the degree of human involvement in the decision-making process, ranging from full human discretion, machine-based predictions with high human involvement, machine-based predictions with low human involvement, and fully machine-based decisions. We find that machine-based predictions with high human involvement yield the highest and fully machine-based decisions the lowest fairness scores. Different accuracy assessments can partly explain these differences. Fairness scores follow a similar pattern across contexts, with a negative level effect and lower fairness perceptions of human decisions in the context of predictive policing. Our results shed light on the behavioral foundations of several legal human-in-the-loop rules.
    Keywords: algorithms, predictive policing, school admissions, refugee-matching, fairness
    Date: 2022–05–24
  4. By: Schmitz, Patrick W.
    Abstract: A buyer wants to purchase an innovative good from a seller. Both parties are risk-neutral, and payments from the buyer to the seller must be non-negative. After the contract is signed, the seller privately observes a signal, which may be informative about the seller's costs. We compare two contracting regimes. In the case of specific performance, the courts enforce the trade level specified in the contract. In the case of at-will contracting, the seller is free to walk away from the contract after the signal has been realized. While the buyer prefers specific performance and the seller prefers at-will contracting, the optimal regime from an economic efficiency point-of-view depends on the informativeness of the signal.
    Keywords: contract theory; specific performance; at-will contracts; asymmetric information; ex-post inefficiencies
    JEL: D86 H57 K12 L14
    Date: 2022
  5. By: Toke S. Aidt (Faculty of Economics, University of Cambridge); Jean Lacroix (Université Paris-Saclay, Faculté Jean Monnet, RITM); Pierre-Guillaume Méon (Centre Emile Bernheim, Université libre de Bruxelles)
    Abstract: This paper studies a new mechanism that allows political elites from a non-democratic regime to survive a democratic transition: connections. We document this mechanism in the transition from the Vichy regime to democracy in post-World War II France. The parliamentarians who had supported the Vichy regime were purged in a two-stage process where each case was judged twice by two di erent courts. Using a di erence-in-di erences strategy, we show that Law graduates, a powerful social group in French politics with strong connections to one of the two courts, had a clearance rate that was 10 percentage points higher than others. This facilitated the persistence of that elite group. A systematic analysis of 17,589 documents from the defendants' dossiers is consistent with the hypothesis that the connections of Law graduates to one of the two courts were a major driver of their ability to avoid the purge. We consider and rule out alternative mechanisms.
    Keywords: Purges, Political transitions, Elite persistence, Connections
    JEL: D73 K40 N44 P48
    Date: 2022–05
  6. By: Andrea Renda (EUI School of Transnational Governance); Rosa Castro (European Public Health Alliance); Guillermo Hernández (OECD)
    Abstract: This paper aims to support better-targeted and more homogeneous data collection and comparative analysis of regulatory oversight bodies (ROBs). To do so, it builds on relevant academic literature and available data to sharpen the definition of ROB used in OECD analytical work and policy discussions. It also discusses ROBs’ role within the regulatory governance cycle as well as various aspects related to regulatory oversight and co-ordination, with special attention to the overall institutional setting (including the relationships between various ROBs), context and objectives of regulatory reform, tasks and responsibilities, and associated accountability arrangements.
    Keywords: good regulatory practices, regulatory oversight, regulatory policy
    JEL: C18 D7 H11 K2 K00
    Date: 2022–05–20
  7. By: Jon H. Fiva; Oda Nedregård
    Abstract: How important are political parties in motivating and disciplining elected officials? Using a difference-in-discontinuity design, we study how shocks to incumbents’ re-election probabilities affect legislative behavior in a setting where parties fully control candidate selection. We find that within-session variation in lame-duck status has a strong negative effect on the probability of showing up in parliament to vote. We find, however, no clear evidence that lame-duck status affects the extent to which legislators deviate from the party line. Our findings align well with the citizen-candidate framework, where candidates have fixed ideological positions that do not vary based on electoral incentives.
    Keywords: political parties, party discipline, roll-call votes, legislative speech, difference-in-discontinuity design
    JEL: D72
    Date: 2022
  8. By: Haselmann, Rainer; Krahnen, Jan Pieter; Tröger, Tobias; Wahrenburg, Mark
    Abstract: This briefing paper describes and evaluates the law and economics of institution(al) protection schemes. Throughout our analysis, we use Europe's largest such scheme, that of German savings banks, as paradigm. We find strengths and weaknesses: Strong network-internal monitoring and early warning seems to be an important contributor to IPS network success. Similarly, the geographical quasi-cartel encourages banks to build a strong client base, including SME, in all regions. Third, the growth of the IPS member institutions may have benefitted from the strictly unlimited protection offered, in terms of euro amounts per account holder. The counterweighing weaknesses encompass the conditionality of the protection pledge and the underinvestment risk it entails, sometimes referred to as blackmailing the government, as well as the limited diversification potential of the deposit insurance within the network, and the near-incompatibility of the IPS model with the provisions of the BRRD, particularly relatingto bail-in and resolution. Consequently, we suggest, as policy guidance, to treat large IPS networks similar to large banking groups, and put them as such under the direct supervision of the ECB within the SSM. Moreover, we suggest strengthening the seriousness of a deposit insurance that offers unlimited protection. Finally, to improve financial stability, we suggest embedding the IPS model into a multi-tier deposit re-insurance scheme, with a national and a European layer. This document was provided by the Economic Governance Support Unit at the request of the ECON Committee.
    Keywords: IPS,deposit guarantee scheme,savings banks
    Date: 2022
  9. By: Marzia Romanelli (Bank of Italy); Pietro Tommasino (Bank of Italy); Emilio Vadalà (Bank of Italy)
    Abstract: We review the general reasons for limiting the discretion of national fiscal policies in the context of a monetary union and, on this basis, we assess the shortcomings of the current Euro area fiscal framework as well as the merits of the main proposals for its reform. Taking into account the elements of consensus that emerged in the debate, we outline a possible revision of the European fiscal rules. The framework we propose aims at public debt sustainability – focusing on those policies which are clearly harmful to member countries – and it is simple and transparent – avoiding the use of unobservable variables. The new framework would be based on a medium-term debt target and a multi-annual headline deficit profile consistent with that target. The new rules should be complemented with a common fiscal capacity, to compensate for the loss of policy discretion at the national level and to internalize cross-country fiscal spillovers. In particular, we suggest introducing a “contingent†facility, which would be activated in cases specified ex ante or for the realization of common projects of exceptional nature (such as the green transition).
    Keywords: fiscal policy rules, fiscal policy, euro area, fiscal federalism, fiscal union
    JEL: F45 E61 E62 H77
    Date: 2022–04
  10. By: Luca Lazzarini (IPC-IG)
    Keywords: social protection; legal frameworks; children's rights
    Date: 2020–12
  11. By: P. Battiston; L. Chollete; S. Harrison
    Abstract: Evidence in the applied literature indicates that policies intended to stimulate positive externalities via coercion can backfire. For example, Davis (2008) finds that when in 1989, the government of Mexico City tried to control air pollution by banning most drivers from driving their vehicle one weekday per week, many drivers bought another, used, high emissions car, which ended up worsening pollution. In order to test for such effects, we run a repeated public goods experiment where subjects are randomly forced to contribute. All group members are informed about forcing after it happens. We find that when random forcing is present, intended contributions are significantly larger in absolute terms. Moreover, contributions decrease significantly after being forced to contribute, and tend to increase after another group member is forced to contribute. Hence, our results indicate that forcing mechanisms have indirect effects that must be taken into account when assessing the overall impact of policies aimed at stimulating positive externalities.
    Keywords: unintended consequences, public good game, laboratory experiment, reciprocity
    JEL: C92 D04 H41
    Date: 2022
  12. By: Francesca Barigozzi (UNIBO - Alma Mater Studiorum University of Bologna); Helmuth Cremer (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Jean-Marie Lozachmeur (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CNRS - Centre National de la Recherche Scientifique)
    Abstract: We study the design of pension benets for male and female workers. Women live longer than men but have a lower wage. Individuals can be single or live in couples who pool their incomes. Social welfare is utilitarian but an increasing concave transformation of individuals lifetime utilities introduces the concern for redistribution between individuals with di¤erent life-spans. We derive the optimal direction of redistribution and show how it is a¤ected by a gender neutrality rule. With singles only, a simple utilitarian solution implies re- distribution from males to females. When the transformation is su¢ ciently concave redistribution may or may not be reversed. With couples only, the ranking of gender retirement ages is always reversed when the transformation is su¢ ciently concave. Under gender neutrality pension schemes must be self-selecting. With singles only this implies distortions of retirement decision and restricts redistribution across genders. With couples, a rst best that implies a lower retirement age for females can be implemented by a gender-neutral system. Otherwise, gender neutrality implies equal retirement ages and restricts the possibility to compensate the shorter-lived individuals. Calibrated simulations show that when singles and couples coexist, gender neutrality substantially limits redistribution in favor of single women and fully prevents redistribution in favor of male spouses.
    Keywords: Retirement systems,Gender gap in longevity,Gender wage gap
    Date: 2022–04–04

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