nep-law New Economics Papers
on Law and Economics
Issue of 2022‒11‒21
twelve papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Imperfect Information About Consumer Rights: Implications for Efficiency and Distribution By Baumann, Florian; Friehe, Tim; Wenzel, Tobias
  2. NAFTA and Drug-Related Violence in Mexico By Eduardo Hidalgo; Erik Hornung; Pablo Selaya
  3. Spillover effects of immigration policies on children's human capital By Arenas-Arroyo, Esther; Schmidpeter, Bernhard
  4. Subnational democratization and the onset of the Mexican drug war By Luis Sanchez; Vassilis Sarantides
  5. Efficient liability law when parties genuinely disagree By Luigi Alberto Franzoni
  6. Legal recognition of customary water tenure in Sub-Saharan Africa: unpacking the land-water nexus By Troell, J.; Keene, S.
  7. The EU Proposal for a Carbon Border Adjustment Mechanism (CBAM): An Analysis under WTO and Climate Change Law By Espa, Ilaria; Francois, Joseph
  8. Litigation with Negative Expected Value Suits: An Experimental Analysis By Cary Deck; Paul Pecorino; Michael Solomon
  9. Attribution of Collective Causal Responsibility to Individual Actors in a Stochastic System By Mittelstaedt, Christian; Baumgärtner, Stefan
  10. The Effects of Introducing Withholding on Tax Compliance: Evidence from Pennsylvania’s Local Earned Income Tax By Sutirtha Bagchi
  11. The color of corporate loan securitization By Müller, Isabella; Nguyen, Huyen; Trang Nguyen
  12. Political Advertising by Special Interest Groups and Voter Participation: The Effects of Less Restrictive Campaign Finance Rules Following Citizens United By Balles, Patrick

  1. By: Baumann, Florian; Friehe, Tim; Wenzel, Tobias
    JEL: D18 K12 K13
    Date: 2022
  2. By: Eduardo Hidalgo; Erik Hornung; Pablo Selaya
    Abstract: We study how NAFTA changed the geography of violence in Mexico. We propose that this open border policy increased trafficking profits of Mexican cartels, resulting in violent competition among them. We test this hypothesis by comparing changes in drug-related homicides after NAFTA’s introduction in 1994 across municipalities with and without drug-trafficking routes. Routes are predicted least cost paths connecting municipalities with a recent history of detected drug trafficking with U.S. land ports of entry. On these routes, homicides increase by 2.3 per 100,000 inhabitants, which is equivalent to 27% of the pre-NAFTA mean. These results cannot be explained by changes in worker’s opportunity costs of using violence resulting from the trade shock.
    Keywords: violence, NAFTA, free trade, Mexico, illegal drug trafficking, conflict
    JEL: K42 F14 D74 O54
    Date: 2022
  3. By: Arenas-Arroyo, Esther; Schmidpeter, Bernhard
    Abstract: We study the spillover effects of immigration enforcement policies on children's human capital. Exploiting the temporal and geographic variation in the enactment of immigration enforcement policies, we find that English language skills of US-born children with at least one undocumented parent are negatively affected by the introduction of these policies. Changes in parental investment behavior cause this reduction in children's English skills. Parents are less likely to enroll their children in formal non-mandatory preschool, substituting formal non-mandatory preschool education with parental time at home. Parents also reduce time spent on leisure and socializing, providing children with fewer opportunities to interact and lean from others. Ultimately, these developments reduce children's long-term educational success. Exposure to immigration enforcement during early childhood lowersthe likelihood of high school completion. We also find negative, though imprecise, effects on college enrollment.
    Keywords: Immigration policies,children's human capital,children's language skills,parental investment
    JEL: K37 J13 J15
    Date: 2022
  4. By: Luis Sanchez (Department of Economics, University of Sheffield, 9 Mappin Str, Sheffield S1 4DT, UK.); Vassilis Sarantides (Athens University of Economics and Business, Patission 76, Athens 10434, Greece)
    Abstract: The Mexican drug war escalated dramatically since 2007. However, its origin is in the 1990s turf wars involving the main drug trafficking organisations operating in the country. In this study we seek to examine the main cause of turf wars at the municipal level between 1995-2006. In particular, we highlight the significant role of a large-scale land titling reform (PROCEDE) that secured property rights for the electorate, previously controlled by the state party (PRI) for seven decades. Our results indicate that political change at the municipality level after the rollout of PROCEDE is a significant determinant of organised crime deaths (OCDs). We further provide evidence that the effect is exacerbated when municipal political change is combined with a change at the gubernational level. We also show that increased intercartel violence is inextricably linked to the geographic expansion of cartel operations. Overall, the fall of the PRI at the subnational level after the rollout of PROCEDE - to signify its strong local roots - broke the equilibrium between corrupted local officials and local drug cartels making the latter more vulnerable to expansion operations of rival cartels resulting in more OCDs.
    Keywords: land reform; PROCEDE; PRI; democratisation; organised crime deaths
    JEL: D72 K42 O54 Q15
    Date: 2022–10
  5. By: Luigi Alberto Franzoni
    Abstract: This article compares the classic liability rules, negligence and strict liability, under the hypothesis that injurers and victims formulate subjective beliefs about the probabilities of harm. Parties may reasonably disagree in their assessment of the precautionary measures available: a measure regarded as safe by one party may be regarded as not safe by the other. By relying on the notions of Pareto efficiency and "No Betting" Pareto efficiency, the article shows that negligence is the optimal liability rule when injurers believe that the probability of harm is always higher than the victims do, while strict liability with overcompensatory damages is the optimal rule in the opposite case. The same results apply to bilateral accidents and, specifically, to product-related harms in competitive markets. Overcompensatory ("punitive") damages provide consumers with insurance against their own pessimism.
    JEL: K13 D83 D62
    Date: 2022–10
  6. By: Troell, J.; Keene, S.
    Keywords: Water tenure; Customary tenure; Legislation; Water law; Customary law; Land tenure; Water resources; Nexus approaches; Freshwater; Indigenous peoples' tenure rights; Local communities; Rural areas; Water rights; Land rights; Forests; Legal frameworks; Water governance; Human rights; Gender; Women; Livelihoods; Food security; Sustainable development; Government; Regional organizations; Constitution; Policies; Water user associations; Participation; Transboundary waters; International law
    Date: 2022
  7. By: Espa, Ilaria; Francois, Joseph
    Abstract: Abstract This paper scrutinizes the European Union’s proposal for a carbon border adjustment mechanism (CBAM) under the rules of the World Trade Organization (WTO) and climate change law. It first examines the logic behind the CBAM as a border carbon adjustment measure, having due regard to the complex interplay between its stated carbon leakage rationale and its fair competition mechanics. It then dissects the main anticipated features of the CBAM and discusses how they may fare under both WTO law and climate change law. Finally, it identifies the most critical proposed design elements from a legal perspective and discusses possible alternatives or variations that could better align the CBAM with its climate change purpose. Read the full Working Paper by clicking on the link below.
    Date: 2022–11–02
  8. By: Cary Deck (University of Alabama and Economic Science Institute, Chapman University); Paul Pecorino (University of Alabama); Michael Solomon (Colby College)
    Abstract: The existence of lawsuits providing plaintiffs a negative expected value (NEV) at trial has important theoretical implications for signaling models of litigation. The signaling equilibrium possible absent NEV suits breaks down with NEV suits because plaintiffs do not have a credible threat to proceed to trial undermining the ability to signal type. Using a laboratory experiment, we analyze behavior with and without the possibility of NEV suits. Absent NEV suits, behavior largely follows predicted patterns. However, the possibility of NEV suits does not cause the signaling equilibrium to unravel and does not cause the dispute rate to increase. Plaintiffs only drop NEV lawsuits three-fourths of the time, the rejection rate by defendants for revealing demands rises less than predicted and, contra theory, the rejection rate on demands in the semipooling range remains unchanged.
    Keywords: Dispute Resolution, Negative Expected Value Lawsuits, Laboratory Experiment
    JEL: C91 K41 D82
    Date: 2022
  9. By: Mittelstaedt, Christian; Baumgärtner, Stefan
    JEL: K13 K32 Q50
    Date: 2022
  10. By: Sutirtha Bagchi (Department of Economics, Villanova School of Business, Villanova University)
    Abstract: This paper examines Act 32 of the Pennsylvania state legislature which mandated the introduction of withholding for the local earned income tax (EIT) for all employees and the consolidation of a fragmented collection system to one collector per county effective January 1, 2012. I find that the act resulted in increased compliance with the EIT of about 14 percent, with the increased compliance driven entirely by an increase in revenues as opposed to changes to the tax base or rates. I confirm this result using a differences-in-differences analysis that contrasts tax compliance for school districts in Pennsylvania with those in Iowa – the only other state where a majority of school districts levy a local income tax. Falsification exercises examining compliance with the property tax confirm that Act 32 did not impact the property tax in either the event study or the differences-in-differences analysis.
    Keywords: Earned income tax; Tax compliance; Withholding; Event Study
    JEL: H26 H71 R51
    Date: 2022–11
  11. By: Müller, Isabella; Nguyen, Huyen; Trang Nguyen
    Abstract: We examine whether banks manage firms' climate transition risks via corporate loan securitization. Results show that banks are more likely to securitize loans granted to firms that become more carbon-intensive. The effect is more pronounced if banks have a lower willingness to adjust loan terms. Exploiting the election of Donald Trump as an exogenous shock that lowers transition risk, we show that banks respond by a lower securitization of loans given to firms that become more carbon-intensive. This is mainly driven by banks that have no or low preferences for sustainable lending and domestic lenders.
    Keywords: climate change,risk shifting,securitization,syndicated lending,Trumpelection
    JEL: G21 G28 K11
    Date: 2022
  12. By: Balles, Patrick
    JEL: D72 K16 L82
    Date: 2022

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