nep-law New Economics Papers
on Law and Economics
Issue of 2022‒08‒15
thirteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Market for Artificial Intelligence in Health Care and Compensation for Medical Errors By Chopard, Bertrand; Musy, Olivier
  2. Neutralizing the Tentacles of Organized Crime. Assessment of an Anti-Crime Measure in Fighting Mafia Violence By Baraldi, Anna Laura; Papagni, Erasmo; Stimolo, Marco
  3. Using experimental evidence to improve delegated enforcement By Fiala, Lenka; Husovec, Martin
  4. Antitrust Law and Business Dynamism By Vaziri, M.
  5. The legal basis for affirmative action in India By Kiruba Munusamy
  6. Law-Making Processes in Federal Nepal By Khim Lal Devkota
  7. Effects of Restrictive Abortion Legislation on Cohort Mortality Evidence from 19th Century Law Variation By Joanna N. Lahey; Marianne H. Wanamaker
  8. Detection of Collusive Networks in E-procurement By Bruno Baranek; L. Musolff; Vitezslav Titl
  9. Norms as Obligations By Leonard Hoeft; Michael Kurschilgen; Wladislaw Mill; Simone Vannuccini
  10. Will the Remote Work Revolution Undermine Progressive State Income Taxes? By David R. Agrawal; Kirk J. Stark
  11. The impact of labour market deregulation reforms on fertility in Europe By Elena Bastianelli; Raffaele Guetto; Daniele Vignoli
  12. BigTech cryptocurrencies - European regulatory solutions in sight By Kotovskaia, Anastasia; Meier, Nicola
  13. Managing sovereign debts held by the ESCB: Operational and legal constraints By Micossi, Stefano

  1. By: Chopard, Bertrand; Musy, Olivier
    Abstract: We study the market for AI systems that are used to help to diagnose and treat diseases, reducing the risk of medical error. Based on a two-firm vertical product differentiation model, we examine how, in the event of patient harm, the amount of the compensation payment, and the division of this compensation between physicians and AI system producers affects both price competition between firms, and the quality (accuracy) of AI systems. One producer sells products with the best-available accuracy. The second sells a system with strictly lower accuracy at a lower price. Specifically, we show that both producers enjoy a positive market share, so long as some patients are diagnosed by physicians who do not use an AI system. The quality of the system is independent of how any compensation payment to the patient is divided between physicians and producers. However, the magnitude of the compensation payment impacts price competition. Increased malpractice pressure leads to lower vertical differentiation, thus encouraging price competition. We also explore the effect of compensation on firms’ profits at equilibrium. We conclude by discussing our results with respect to the evolution of the civil liability regime for AI in healthcare.
    Keywords: Artificial Intelligence, Diagnostic, Duopoly, Liability, Physician, Compensation
    JEL: I11 K13 K41 L13
    Date: 2022–06–09
  2. By: Baraldi, Anna Laura; Papagni, Erasmo; Stimolo, Marco
    Abstract: Organized crime reinforces its corrupting influence on politics through violent intimidation. Anti-crime measures that increase the cost of corruption but not of the exercise of violence might accordingly lead mafia-style organizations to retaliate by resorting to violence in lieu of bribery. On the other hand, anti-corruption measures might also induce criminal clans to go inactive, owing to the higher “entry barriers” to the “business” of influencing politics, which would reduce violence. To determine which of these possible effects is prevalent, we undertake an empirical assessment of the impact of city council dissolution for mafia influence as prescribed by Decree Law 164/1991 in discouraging violence against politicians in the period 2010-2019. Our difference-in-differences analysis shows that in the dissolved municipalities the enforcement of the Law reduces violence, the effect persisting for two electoral rounds. Also, we find spillover effects moderating violence in undissolved neighboring municipalities. These findings are robust to a series of endogeneity tests.
    Keywords: Public Economics
    Date: 2022–07–29
  3. By: Fiala, Lenka; Husovec, Martin
    Abstract: Digital content today is governed by online providers like Facebook or YouTube. Increasingly, these providers are expected to enforce the law by removing illegal content, such as copyright infringement or hate speech. Typically, once they are notified of its existence, they have to assess it and, if infringing, remove it. Otherwise, they face liability. This system of content moderation is a form of delegation of the state’s tasks to private parties. In literature, it is empirically established that some schemes of delegated enforcement can trigger substantial false positives, mostly due to over-compliance by providers and under-assertion of rights by affected content creators. This results in a phenomenon known as over-blocking: collateral removal of lawful content. We conduct a laboratory experiment to test a possible solution to this issue, as proposed by Husovec (2016). Our results show that an external dispute resolution mechanism subject to a particular fee structure can significantly reduce over-compliance by providers and improve the accuracy of their decisions, largely thanks to the content creators taking initiative. It does so by re-calibrating the typical asymmetry of incentives under the delegated enforcement schemes. The principles behind the solution have the potential to improve also other schemes of delegated enforcement where providers have weak incentives to properly execute delegated tasks in the public interest.
    Keywords: lab experiment; notice and takedown; online enforcement; copyright; content moderation; alternative dispute resolution; Tilburg Law and Economics Center (TILEC); Elsevier deal
    JEL: C91 D02 K42
    Date: 2022–09–01
  4. By: Vaziri, M.
    Abstract: In this paper, I study firms' strategic and anticompetitive behaviour, and the consequent role of antitrust law as a macroeconomic policy in promoting business dynamism. Over the past few decades, business dynamism has been declining in the US: firm entry has fallen, accompanied by a slowdown in the rate of productivity growth. Additionally, enforcement of antitrust law has been at historically low levels. Using firm-level and sector-level data from the US, I find that stronger antitrust enforcement is associated with higher entry and higher productivity growth but lower R&D investments. Next, I develop and structurally estimate a dynamic general equilibrium model with innovation and oligopolistic product market competition. The dynamic structure of the model allows rms to eliminate competition through strategic decision making. The model is calibrated to the recent US experience and quantitative exercises show that strengthening antitrust policies results in: (1) a higher firm entry rate, (2) a higher rate of productivity growth, (3) a larger labour share of GDP, and (4) a decline in the innovation rate. Overall, the model indicates that stronger antitrust policies are effective at restoring business dynamism and can deliver up to 16% higher welfare in consumption-equivalent terms. The improvement in welfare is mainly driven by an increase in the welfare of workers, without affecting the capitalists, suggesting that antitrust law has distributional implications, and therefore, has a potential role in reducing inequality.
    Date: 2022–07–18
  5. By: Kiruba Munusamy
    Abstract: The affirmative action policy in India came into practice because of the generations of struggle undergone by the untouchable castes and other backward classes, who were historically excluded from education and administration. As society changed, it was inevitable that the vulnerable groups who had so far been forgotten in terms of social justice should be 'included'. However, this paper finds that, instead of recognizing this need the judiciary continued to apply illogical limitations and age-old precedents that disrupted the implementation of affirmative action.
    Keywords: Affirmative action, Political reservations, India, Judicial, Justice, Law
    Date: 2022
  6. By: Khim Lal Devkota (International Studies Program. Andrew Young School of Policy Studies, Georgia State University)
    Abstract: Laws are an indispensable element for the smooth running of any system of governance. Since Nepal entered into federalism, efforts and achievements that should have happened in law implementation and enforcement have not been satisfactorily completed. In recent years, Nepal’s law-making processes have been rife with issues. Parliament is not very active, and even parliamentary committees are not working as expected. In some committees, bills have been stuck for three years. To date, no law has yet been enacted regarding the drafting of a law. It is important to formulate such a law to determine the basic criteria related to the creation and publication of legislation and to maintain uniformity and quality in law making.This paper provides a descriptive analysis of Nepal's law-making processes. The analysis is based on the constitution and documents issued by the Federal Parliament. The author is a member of the Federal Parliament, and some of the issues that the author has seen and experienced inform this analysis. The paper focuses on developments after the promulgation of the federal constitution in 2015 and excludes subnational-level issues.
    Keywords: Tax administration, tax compliance, policy reform, globalization, digital economy
    Date: 2022–05–01
  7. By: Joanna N. Lahey; Marianne H. Wanamaker
    Abstract: Recent studies based on 20th century US data conclude that abortion access raises children’s average socioeconomic outcomes. We generalize a model of fertility, highlighting assumptions under which these abortion predictions can be reversed. Using 19th century abortion restrictions, we empirically demonstrate these points. Despite a more than 5 percent increase in birth rates among abortion-restricted cohorts, we find little evidence of negative selection at birth. Longevity was affected nevertheless; in the first ten years of life, children in these larger cohorts died of infectious disease more frequently. These mortality effects diminish with age, potentially reversing at older ages as a result of disease immunity or other offsetting factors.
    JEL: H75 J1 J13 J16 J18 K14 K15 K38 N3 N31 N4 N41
    Date: 2022–07
  8. By: Bruno Baranek; L. Musolff; Vitezslav Titl
    Abstract: Collusion likely has adverse effects on social welfare. In this paper, we study collusion in the e-procurement market in Ukraine. We document that the bidding patterns in the data are incompatible with a competitive equilibrium. We develop a novel structural test to detect pairs and, thereby, networks of collusive firms. We validate the soundness of our collusion detection algorithm on a sample of 863 prosecuted collusive firms that participated in 23,515 tenders.
    Keywords: Public procurement, Collusion, Online markets
    Date: 2021
  9. By: Leonard Hoeft (Humboldt University to Berlin); Michael Kurschilgen (Technical University of Munich, the Max Planck Institute for Research on Collective Goods, and the Stanford Graduate School of Business); Wladislaw Mill (University of Mannheim); Simone Vannuccini (Science Policy Research Unit, University of Sussex)
    Abstract: Economists model legal compliance as the process of maximizing utility while weighing the consequences from norm violation against other (monetary and non-monetary) considerations. Legal philosophers, on the other hand, believe that norms provide exclusionary reasons, i.e. that people apply the norm precisely to make a choice without weighing up on other issues. We test and compare both models in a controlled online experiment. We conduct a modified dictator game with partially unknown yet ascertainable payoffs, and vary between treatments the presence and content of authoritative norms. Our experimental results show that – in the presence of a norm – participants follow norms without searching for information that they deem important in the absence of a norm. This pattern is independent of the specific content of the norm. Our results are consistent with the legal model of norm compliance.
    Keywords: Norms, Information, Authority, Willful Ignorance, Dictator Game, Legal Theory, Experiment
    JEL: C91 D63 D81 D83 K10
    Date: 2022–07
  10. By: David R. Agrawal; Kirk J. Stark
    Abstract: The remote work revolution raises the possibility that a larger segment of the population will be able to sever the geographic linkage between home and work. What are the taxing rights of states as to nonresident remote workers? May a state impose income taxes on nonresident employees only to the extent they are physically working within the state? Does state taxing power extend to all income derived from in-state firms, including wages paid to those who never set foot in the state? Standard sourcing rules attribute wage income to the employee’s physical location. In the presence of remote work, however, rigid adherence to this physical presence rule could intensify the progressivity-limiting dynamics of federalism by reducing the costs to households of exploiting labor income tax differentials across jurisdictions. We document the rise of remote work and the status of state-level income tax progressivity as well as its evolution over time. We consider how alternative legal rules for the sourcing of income can affect telework-induced mobility, but conclude that, regardless of which sourcing regime prevails in coming legal battles, the rise of remote work is likely to limit redistribution via state income taxes. While some sourcing rules may better preserve progressivity in the short term than others, the more fundamental threat to progressive state tax regimes derives from remote work’s long-term erosion of the benefits of urban spatial clustering. To the extent that the nation’s productive cities lose their allure as centers of agglomeration and the wages of high-skilled workers in these cities fall, the ability of their host states to pursue redistributive tax policies will likely be constrained. These deglomeration effects will arise regardless of how state taxing rights are adapted for the remote work era, and therefore may carry with them implications for income tax progressivity at the federal level.
    Keywords: income tax, remote work, sourcing rules, progressivity
    JEL: H20 H70 J60 K30 R50
    Date: 2022
  11. By: Elena Bastianelli (Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti", Università di Firenze); Raffaele Guetto (Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti", Università di Firenze); Daniele Vignoli (Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti", Università di Firenze)
    Abstract: It is theoretically ambiguous whether a more loosely regulated labour market should inhibit or foster fertility in a society. Micro-level studies on the effects of employment instability on family formation have primarily focused on single episodes of unemployment or temporary employment, by means of event history analyses modelling the instantaneous effects of labour market transitions. This approach has highlighted the existence of a negative association between employment instability and fertility but makes it difficult to evaluate the overall fertility consequences of the several waves of labour market deregulation reforms implemented in Europe. Furthermore, the few existing studies analysing the relationship between employment protection legislation (EPL) and fertility have found mixed evidence. This paper reconciles the ambivalent conclusions of previous studies by analysing the impact of labour market (de)regulation reforms on total fertility across 19 European countries between 1990 and 2019. We operationalize the country-specific regulatory strictness of regular and temporary contracts over time through the OECD EPL indexes. Our results indicate that an increase in employment protection for regular workers positively affects total fertility. However, an increasing gap between the regulation of regular and temporary employment – that is, labour market segmentation – negatively impacts total fertility. These effects are relatively homogeneous across age groups and geographical areas and are especially pronounced among the lower-educated. We conclude that labour market segmentation, rather than a rigid EPL per se, depresses fertility.
    Keywords: Labour market deregulation; Employment protection legislation (EPL); Total fertility rate (TFR); Europe; Regression analysis; Fixed-effect estimator
    JEL: J13 J21 J41 J64 J48
    Date: 2022–07
  12. By: Kotovskaia, Anastasia; Meier, Nicola
    Abstract: Large technology firms ("BigTechs") increasingly extend their influence in finance, primarily taking over market shares in payment services. A further expansion of their businesses into the territory of cryptocurrencies could entail new and unprecedented risks for the future, namely for financial stability, competition in the private sector and monetary policy. When creating a regulatory toolbox to address these risks, financial regulatory, antitrust, and platform-specific solutions should be closely intertwined in order to fully absorb all the potential threats and to take account of the complex risks these platform companies bear. This policy letter evaluates the solutions lately proposed by the European Commission, with specific focus on the upcoming regulation of Markets in crypto-assets (MiCA), but also the Digital Markets Act (DMA) and Digital services act (DSA), against the background of cryptocurrencies issued by BigTechs and sheds light on financial regulatory, competition and monetary law issues coming along with the possible designs of these cryptocurrencies.
    Keywords: Cryptocurrencies,Big Techs,MiCA,DMA,DSA,European Commision
    Date: 2022
  13. By: Micossi, Stefano
    Abstract: Following the proposal by Avgouleas and Micossi (2021) and Micossi (2021), several authors (Amato and Saraceno 2022, Baglioni and Bordignon 2022, Cottarelli and Galli 2021, D’Amico et al. 2022) have engaged in the debate on how to manage the sovereign debt portfolio accumulated by the European System of Central Banks (ESCB) as a result of their purchase programmes undertaken since 2015 to fight deflation in the eurozone and provide emergency support to the economy in response to the Covid-19 pandemic. These proposals share the common goal of addressing an important and urgent public policy problem but differ in their specific institutional solutions. This paper provides an assessment of their consistency with present European legal and institutional arrangements in order to assess their practical relevance. The conclusion is that a new mechanism is needed to free the ESCB of the encumbrance of the sovereigns acquired following their assets purchase programmes. The ESM could perform that task while respecting all relevant European law.
    Date: 2022–02

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