nep-law New Economics Papers
on Law and Economics
Issue of 2022‒09‒26
twelve papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Localised Effects of Re-allocated Real Estate Mafia Assets By Filippo Boeri; Marco Di Cataldo; Elisabetta Pietrostefani
  2. "Cartel destabilization effect of leniency programs". By Joan-Ramon Borrell; Carmen García; Juan Luis Jiménez; José Manuel Ordóñez-de-Haro
  3. Market Power of Digital Platforms By Jens-Uwe Franck; Martin Peitz
  4. Family Formation and Crime By Maxim N. Massenkoff; Evan K. Rose
  5. The Political Economy of the Decline in Antitrust Enforcement in the United States By Lancieri, Filippo; Posner, Eric; Zingales, Luigi
  6. Does Occupational Licensing Reduce Value Creation on Digital Platforms? By Peter Q. Blair; Mischa Fisher
  7. Big Techs vs Banks By Leonardo Gambacorta; Fahad Khalil; Bruno Maria Parigi
  8. The New Corporate Governance By Hart, Oliver D.; Zingales, Luigi
  9. Impact of the right to education on school enrolment of children with disabilities: Evidence from India By Vinitha Varghese
  10. Competition, Alignment, and Equilibria in Digital Marketplaces By Meena Jagadeesan; Michael I. Jordan; Nika Haghtalab
  11. The governance of civil aviation authorities in Latin American countries: Evidence from ICAO’s North American, Central American and Caribbean and South American regions By Alexis Durand; Anna Pietikäinen
  12. llicit Financial Flows - The illusion of a common denominator By Johnny Flentø; Leonardo Santos Simao

  1. By: Filippo Boeri (Centre for Economic Performance, London School of Economics; Department of Economics, ESSEC Business School); Marco Di Cataldo (Department of Economics, University Of Venice CÃ Foscari; Department of Geography and Environment, London School of Economics); Elisabetta Pietrostefani (Department of Geography and Environment, London School of Economics; Bartlett Faculty of the Built Environment, University College London)
    Abstract: In an effort to tackle organised crime, the Italian State implements a policy stipulating that properties confiscated to individuals convicted of mafia-related crimes are reallocated to a new use. The policy is meant to act as both an anti-mafia measure and a way to compensate local communities by converting real-estate assets into public amenities. We assess whether this scheme has an effect on the regeneration of local areas by assessing its impact on the value of properties in the vicinity of re-allocated assets and crime activity. The results unveil a positive effect of re-allocated real estate assets on house prices, driven by mafia strongholds, more deprived neighbourhoods, and areas with more inelastic housing supply. The findings suggest declining effects with distance from the re-allocation site, indicating that the policy impact is highly localised. Part of this effect appears due to a decrease in organised crime activity in the streets where re-allocations have taken place. These findings have implications for the effectiveness of policies aiming to improve the quality of neighbourhoods where mafia presence is more pronounced.
    Keywords: Organised crime, confiscation, hedonic analysis, urban regeneration policy, Italy
    JEL: K42 R32 H23
    Date: 2022
  2. By: Joan-Ramon Borrell (Universitat de Barcelona, Dep. d’Econometria, Estadística i Economia Aplicada- Institut d'Economia Aplicada (IREA) - Grup de Governs i Mercats (GiM), 1-11 John M. Keynes Street, Spain; and, University of Navarra, IESE Business School, Public-Private Sector Research Center.); Carmen García (Universidad de Las Palmas de Gran Canaria. Facultad de Economía, Empresa y Turismo. 35017. Las Palmas de Gran Canaria.); Juan Luis Jiménez (Universidad de Las Palmas de Gran Canaria. Facultad de Economía, Empresa y Turismo. Despacho D. 2-12. 35017. Las Palmas de Gran Canaria.); José Manuel Ordóñez-de-Haro (Universidad de Málaga, Dep. de Teoría e Historia Económica, Pl. El Ejido, s/n. 29013. Málaga.)
    Abstract: This paper investigates the theoretically and empirically unsettled question of the effect of the leniency programs on cartel duration, cartel fines and the length of the investigation. The fact that leniency programs were implemented in two different jurisdictions (EU and Spain) at different moments of time, and the exogeneity of the date of introduction, allow us to identify and quantify the effect of the programs on the outcomes using difference-in-difference program evaluation techniques. We empirically show that leniency programs destabilize existing cartels in the short run as expected from theory and previous empirical papers, and then dissuade the creation of new cartels in the long run. Deterrence effects dominate empirically in the long run, although theoretically they might not dominate, and previous empirical findings were inconclusive. Fines per firm increase substantially after the introduction of the leniency policy, despite whistleblowing firms are partially or totally exempted from fines. The duration of the investigation increases with the introduction of the leniency programs. Leniency programs have sharp and clear short-run cartel destabilization and long-run cartel dissuasion effects.
    Keywords: Antitrust, Competition Policy, Cartels, Leniency programs. JEL classification: D7, K2, L4, O4.
    Date: 2022–09
  3. By: Jens-Uwe Franck; Martin Peitz
    Abstract: Digital platforms have reshaped many product markets and play an increasingly important role in economies around the globe. Some of these platforms have become powerful players and may possess a lot of market power. Economists use a number of indicators to assess market power. In this article we discuss to which extent these indicators are helpful in the context of digital platforms. In particular, we focus on assessing entrenched market power and the role of potential competition to constrain this power. Finally, we discuss some cross-border issues of platform market power.
    Keywords: market power, digital platforms, Big Tech, potential competition, Brussels effect
    JEL: K21 L40 L13
    Date: 2022–08
  4. By: Maxim N. Massenkoff; Evan K. Rose
    Abstract: We use administrative data from Washington State to perform a large-scale analysis of the impact of family formation on crime. Our estimates indicate that pregnancy triggers sharp declines in arrests rivaling any known intervention, supporting the view that childbirth is a "turning point" that reduces deviant behavior through social bonds. For mothers, criminal arrests drop precipitously in the first few months of pregnancy, stabilizing at half of pre-pregnancy levels three years after birth. Men show a sustained 20 percent decline in crime that begins at pregnancy, although arrests for domestic violence spike at birth. These effects are concentrated among first-time parents, suggesting that a permanent change in preferences---rather than transitory time and budget shocks---may be responsible. A separate design using parents of stillborn children to estimate counterfactual arrest rates reinforces the main findings. Marriage, in contrast, is not associated with any sudden changes and marks the completion of a gradual 50 percent decline in arrests for both men and women.
    JEL: J0 J12 J13 K14
    Date: 2022–08
  5. By: Lancieri, Filippo; Posner, Eric; Zingales, Luigi
    Abstract: Antitrust enforcement in the United States has declined since the 1960s. We investigate the political causes of this decline by looking at who made the crucial decisions and the strength of their popular mandate. Using a novel framework to understand the determinants of regulatory capture and several new datasets, we find that there was no public support for the weakening of antitrust enforcement. The decline in antitrust enforcement was the result of a collection of technocratic decisions made in politically unaccountable ways, mostly by regulators and judges. Behind the scenes, big business played a major role in influencing these agents; but other factors (like the increase in private sector pay relative to government pay) and intellectual currents mattered as well.
    Date: 2022
  6. By: Peter Q. Blair; Mischa Fisher
    Abstract: We test whether occupational licensing undercuts a key goal of digital marketplaces— to increase social surplus by increasing the effectiveness of customer search. Our setting is a large online marketplace in the $500B home services industry where a platform converts customer search into sales leads that are accepted for purchase by service providers on the platform. For each of the 21 million observations in our data set, we observe task-level variation in the state licensing requirements that service providers must meet to operate on the platform. Exploiting two natural experiments, we find that licensing reduces the accept rate of sales leads by an average of 25 percent. The accept rate drops because licensing reduces the aggregate labor supply of workers on the platform and not because licensing increases the volume of customer search. We develop a model and derive analytic expressions for the impact of licensing on the welfare of consumers, service providers and the platform as a function of seven sufficient statistics which we estimate from the data. We find that licensing a task reduces service provider surplus and platform surplus without increasing consumer surplus.
    JEL: D60 J44 L51 L86
    Date: 2022–08
  7. By: Leonardo Gambacorta; Fahad Khalil; Bruno Maria Parigi
    Abstract: We study an economy in which large technology companies, big techs, provide credit to firms operating on their platforms. We focus on two advantages that big techs have with respect to banks: better information on their clients and better enforcement of credit repayment since big techs can exclude a defaulting firm from their ecosystem. While big techs have both superior enforcement and complete and private information of the firm type big techs can encroach on banks' turf only if they guarantee some privacy to firms by tempering their drive to collect information about firm characteristics and leaving some rents to them. The way big techs share information i.e. by providing information publicly or in a private way entails different outcomes in terms of efficiency.
    Keywords: big techs, credit markets, privacy, information sharing
    JEL: E51 G23 O31
    Date: 2022–08
  8. By: Hart, Oliver D.; Zingales, Luigi
    Abstract: In the last few years, there has been a dramatic increase in shareholder engagement on environmental and social issues. In some cases shareholders are pushing companies to take actions that may reduce market value. It is hard to understand this behavior using the dominant corporate governance paradigm based on shareholder value maximization. We explain how jurisprudence has sustained this criterion in spite of its economic weaknesses. To overcome these weaknesses we propose the criterion of shareholder welfare maximization and argue that it can better explain observed behavior. Finally, we outline how shareholder welfare maximization can be implemented in practice.
    Keywords: Shareholder Value,Shareholder Welfare,Proxy Voting
    JEL: G3 L21 K22
    Date: 2022
  9. By: Vinitha Varghese
    Abstract: I evaluate the impact of the right to education from the passing of the Right to Education Act in India in 2009. This Act guaranteed free education to children aged 6-14 years, including children with disabilities. Given that the school participation deficit associated with disability is large, I provide results that are a relief to policy-makers. I use an event study estimation and an interrupted time series research design and find that the Right to Education Act led to a 60 per cent increase in schooling among children with disabilities within three years.
    Keywords: People with disabilities, Children, Education, Enrolment, Schooling
    Date: 2022
  10. By: Meena Jagadeesan; Michael I. Jordan; Nika Haghtalab
    Abstract: Competition between traditional platforms is known to improve user utility by aligning the platform's actions with user preferences. But to what extent is alignment exhibited in data-driven marketplaces? To study this question from a theoretical perspective, we introduce a duopoly market where platform actions are bandit algorithms and the two platforms compete for user participation. A salient feature of this market is that the quality of recommendations depends on both the bandit algorithm and the amount of data provided by interactions from users. This interdependency between the algorithm performance and the actions of users complicates the structure of market equilibria and their quality in terms of user utility. Our main finding is that competition in this market does not perfectly align market outcomes with user utility. Interestingly, market outcomes exhibit misalignment not only when the platforms have separate data repositories, but also when the platforms have a shared data repository. Nonetheless, the data sharing assumptions impact what mechanism drives misalignment and also affect the specific form of misalignment (e.g. the quality of the best-case and worst-case market outcomes). More broadly, our work illustrates that competition in digital marketplaces has subtle consequences for user utility that merit further investigation.
    Date: 2022–08
  11. By: Alexis Durand (OECD); Anna Pietikäinen (OECD)
    Abstract: Good governance is a building block for the performance of regulators, including civil aviation authorities. This paper reports the results of a mapping of governance arrangements across 29 civil aviation authorities in Latin American and Caribbean countries, with the International Civil Aviation Organization’s South American and North American, Central American and Caribbean regions. Applying the methodology of the OECD Indicators on the Governance of Sector Regulators, the results provide a birds-eye view of the independence, accountability and scope of action of participating authorities. This paper explains the indicator methodology, summarises key data points, and presents high-level take aways.
    Keywords: accountability, better regulation, independence, Latin America, OECD, regulation, regulatory governance
    JEL: K23 L50 L93 L98 N46 D73
    Date: 2022–09–10
  12. By: Johnny Flentø (Development Economics Research Group, University of Copenhagen); Leonardo Santos Simao (Former Minister of Health, Former Minister of Foreign Affairs & Cooperation, Government of Mozambique)
    Abstract: Illicit financial flows (IFFs) grew significantly with the accelerated liberalization of financial markets during the 1980s and 1990s. In Africa, IFFs out of the continent are believed to equal combined official development assistance and direct foreign investment into the continent. Work to conceptualize and measure IFFs is progressing and many methods for estimating them are being tested. Such methods are inherently crude, and some are questionable. A more fundamental question is whether the concept of IFFs as sometimes used is useful for analytical purposes. The definition adopted by the United Nations in 2020 includes a host of different flows and transactions that have very little in common other than that they are deemed illicit, primarily according to western norms, and are not based on the development effects of flows. The term “illicit financial flows” contains very many and too different types of things, which in combination with the challenges in estimating such flows makes the concept prone to instrumentalization. Defining what is illicit is ultimately a political choice. The world should take care that the work to create an institutional framework for reducing IFFs is not reduced to a platform for the most powerful alliance of governments to impose their version of what is illicit on the rest of the world.
    Keywords: Illicit Flows, Crime, International Economics and Cooperation, Tax Evasion, Drug Trafficking,
    JEL: F02 F51 F52 F53 F54 K34
    Date: 2022–08–07

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