nep-law New Economics Papers
on Law and Economics
Issue of 2023‒02‒20
fifteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Enforcing Fintech Competition: Some Reflections on Institutional Design By Jens-Uwe Franck
  2. Border Apprehensions and Federal Sentencing of Hispanic Citizens in the United States By Simone Bertoli; Morgane Laouenan; Jérôme Valette
  3. Market Definition and Three 19a Designations under German Antitrust Law: Alphabet, Meta, and Amazon By Jens-Uwe Franck; Martin Peitz
  4. Deterrence or Backlash? Arrests and the Dynamics of Domestic Violence By Sofia Amaral; Gordon B. Dahl; Victoria Endl-Geyer; Timo Hener; Helmut Rainer
  5. The Law and Economics of AI Liability By Miriam Buiten; Alexandre de Streel; Martin Peitz
  6. Mandatory Seatbelt Laws and Traffic Fatalities: A Reassessment By D. Mark Anderson; Yang Liang; Joseph J. Sabia
  7. Merger control in retail markets with national pricing By Tommy Staahl Gabrielsen; Bjørn Olav Johansen; Odd Rune Straume
  8. Criminal Charges, Risk Assessment, and Violent Recidivism in Cases of Domestic Abuse By Dan A. Black; Jeffrey Grogger; Tom Kirchmaier; Koen Sanders
  9. Estimating the Impact of the Age of Criminal Majority: Decomposing Multiple Treatments in a Regression Discontinuity Framework By Michael Mueller-Smith; Benjamin Pyle; Caroline Walker
  10. Antitrust, Regulation, and User Union in the Era of Digital Platforms and Big Data By Lin William Cong; Simon Mayer
  11. Seeking the Ideal Privacy Protection: Strengths and Limitations of Differential Privacy By Kazutoshi Kan
  12. Digitalization and Cross-Border Tax Fraud: Evidence from E-Invoicing in Italy By Marwin Heinemann; Wojciech Stiller
  13. Do Minimum Wage Hikes Lead to Employment Destruction? Evidence from a Regression Discontinuity Design in Argentina By Nicolás Abbate; Bruno Jiménez
  14. Women’s Rights and the Gender Migration Gap By Jerg Gutmann; Léa Marchal; Betül Simsek
  15. Risk, Precaution, and Regulation in Chemical Search and Innovation: The Case of the EU REACH Legislation By Gianluca Biggi

  1. By: Jens-Uwe Franck
    Abstract: This paper focuses on institutional design aspects of the enforcement of competition law and other procompetitive regulation in fintech markets. Those interventions may prove necessary because the market entry of technology-enabled innovation may depend on accessing other (competing) market operators’ data and facilities or the enabling of data portability and interoperability of complementing financial services. Basic choices of allocating enforcement powers are identified. Five institutional design topics are discussed: bureaucratic enforcement styles and strategies; efficient use of administrative resources; motivation of staff; treatment of conflicting regulatory objectives; and legitimising elements in competition procedures.
    Keywords: Fintech, Competition Enforcement, Enforcing Regulation, Institutional Design, Enforcement Style, Regulatory Capture
    JEL: K20 K21 K22 K23 K42
    Date: 2022–11
  2. By: Simone Bertoli; Morgane Laouenan; Jérôme Valette
    Abstract: We provide evidence that Hispanic citizens receive significantly longer sentences than non-Hispanic citizens in the Federal Criminal Justice System in the United States when a higher number of illegal aliens are apprehended along the southwest border. Apprehensions can increase the salience of Hispanic ethnic identity, which is associated with persistent negative stereotypes, and can also deteriorate attitudes toward Hispanics. We rule out concerns that apprehensions might convey legally relevant information to judges. Thus, we provide direct evidence for time-varying discrimination toward Hispanic defendants. Our estimated effect is only at play for defendants without a heavy previous criminal record.
    Keywords: Immigration;Ethnic Identity;Discrimination;Attitudes;Salience;Sentences
    JEL: K42 J15 F22
    Date: 2023–01
  3. By: Jens-Uwe Franck; Martin Peitz
    Abstract: The Bundeskartellamt has designated Alphabet, Meta, and Amazon as 19a firms. Thus, they are potentially subject to specific competition law interventions under a special procedure. In these three designation decisions, market definition plays an important role. This article points to several noteworthy aspects that concern market definition. In all decisions the authority focuses on one national market, arguing that the respective platform operator is dominant. The authority’s considerations are made at a somewhat aggregate level, abstracting from differences across market segments.
    Keywords: digital platforms, Big Tech, market definition, multi-markets approach, German Competition Act, 19a designations, competition law
    JEL: K21
    Date: 2023–01
  4. By: Sofia Amaral; Gordon B. Dahl; Victoria Endl-Geyer; Timo Hener; Helmut Rainer
    Abstract: There is a vigorous debate on whether arrests for domestic violence (DV) will deter future abuse or create a retaliatory backlash. We study how arrests affect the dynamics of DV using administrative data for over 124, 000 DV emergency calls (999 calls) for West Midlands, the second most populous county in England. We take advantage of conditional random assignment of officers to a case by call handlers, combined with systematic differences across police officers in their propensity to arrest suspected batterers. We find that an arrest reduces future DV calls in the ensuing year by 51%. This reduction is not driven by reduced reporting due to fear of retaliation, but instead a decline in repeat victimization. We reach this conclusion based on a threshold reporting model and its testable implications regarding (i) the severity of repeat DV calls and (ii) victim versus third-party reporting. Exploring mechanisms, we find that arrest virtually eliminates the large spike in re-victimization which occurs in the 48 hours after a call, consistent with arrest facilitating a cooling off period during a volatile, at-risk time. In the longer run, we estimate a sizeable deterrence effect. Substantiating this, arrest increases the probability an offender is charged with a crime. Our findings argue against recent calls for a decriminalization of domestic violence and suggest the optimal police response is to lower the threshold for arrest.
    Keywords: domestic violence, arrest, deterrence, repeat victimization
    JEL: J12 J16 K42
    Date: 2023
  5. By: Miriam Buiten; Alexandre de Streel; Martin Peitz
    Abstract: When AI systems possess the characteristics of autonomy and unpredictability, they present challenges for the existing liability framework. (Semi)-autonomous AI systems shift control over these systems away from users and towards producers, while errors of AI systems may be difficult to foresee. Policymakers are faced with the questions when existing civil liability rules do not adequately cover risks arising in the context of AI systems, and how they then should be adapted. This paper addresses these two questions for EU non-contractual liability rules. It considers how liability rules affect the incentives of producers, users, and bystanders that may be harmed by AI. The paper provides concrete recommendations for updating the EU Product Liability Directive and for an EU liability framework for owners and users of AI.
    Keywords: Artificial Intelligence, EU law
    JEL: K13 O33
    Date: 2022–11
  6. By: D. Mark Anderson; Yang Liang; Joseph J. Sabia
    Abstract: Using data from the Fatality Analysis Reporting System for the period 1983-1997, Cohen and Einav (Review of Economics and Statistics 2003; 85(4): 828–843) found that mandatory seatbelt laws were associated with a 4 to 6 percent reduction in traffic fatalities among motor vehicle occupants. After successfully replicating their two-way fixed effects estimates, we (1) add 22 years of data (1998-2019) to capture additional seatbelt policy variation and observe a longer post-treatment period, (2) employ the interaction-weighted estimator proposed by Sun and Abraham (2021) to address potential bias due to heterogeneous and dynamic treatment effects, and (3) estimate event-study models to investigate pre-treatment trends and explore lagged post-treatment effects. Consistent with Cohen and Einav (2003), our updated estimates show that primary seatbelt laws are associated with a 5 to 9 percent reduction in fatalities among motor vehicle occupants. Estimated effects of secondary seatbelt laws are smaller in magnitude and sensitive to model choice.
    JEL: I12 K32 K42
    Date: 2023–01
  7. By: Tommy Staahl Gabrielsen (Department of Economics, University of Bergen); Bjørn Olav Johansen (Department of Economics, University of Bergen); Odd Rune Straume (NIPE/Center for Research in Economics and Management, University of Minho, Portugal; and Department of Economics, University of Bergen, Norway)
    Abstract: We analyze theoretically the efficiency of structural remedies in merger control in retail markets and show that this crucially depends on the retail chains´pricing policy. Whereas a retail merger can be perfectly remedied by divestiture of stores under local pricing, such remedies are not only less effective, but might even be counterproductive, if the chains set national prices. Paradoxically, such remedies might be even more counterproductive if the chains also compete locally along non-price dimensions such as quality. Our analysis suggests that antitrust authorities should be very cautious when reviewing structural remedies in retail markets with national pricing.
    Keywords: Retail mergers; structural remedies; national pricing.
    JEL: L11 L22 L41
    Date: 2022
  8. By: Dan A. Black; Jeffrey Grogger; Tom Kirchmaier; Koen Sanders
    Abstract: Domestic abuse is a pervasive global problem. Here we analyze two approaches to reducing violent DA recidivism. One involves charging the perpetrator with a crime; the other provides protective services to the victim on the basis of a formal risk assessment carried out by the police. We use detailed administrative data to estimate the average effect of treatment on the treated using inverse propensity-score weighting (IPW). We then make use of causal forests to study heterogeneity in the estimated treatment effects. We find that pressing charges substantially reduces the likelihood of violent recidivism. The analysis also reveals substantial heterogeneity in the effect of pressing charges. In contrast, the risk-assessment process has no discernible effect.
    JEL: J12
    Date: 2023–01
  9. By: Michael Mueller-Smith; Benjamin Pyle; Caroline Walker
    Abstract: This paper studies the impact of adult prosecution on recidivism and employment trajectories for adolescent, first-time felony defendants. We use extensive linked Criminal Justice Administrative Record System and socio-economic data from Wayne County, Michigan (Detroit). Using the discrete age of majority rule and a regression discontinuity design, we find that adult prosecution reduces future criminal charges over 5 years by 0.48 felony cases (? 20%) while also worsening labor market outcomes: 0.76 fewer employers (? 19%) and $674 fewer earnings (? 21%) per year. We develop a novel econometric framework that combines standard regression discontinuity methods with predictive machine learning models to identify mechanism-specific treatment effects that underpin the overall impact of adult prosecution. We leverage these estimates to consider four policy counterfactuals: (1) raising the age of majority, (2) increasing adult dismissals to match the juvenile disposition rates, (3) eliminating adult incarceration, and (4) expanding juvenile record sealing opportunities to teenage adult defendants. All four scenarios generate positive returns for government budgets. When accounting for impacts to defendants as well as victim costs borne by society stemming from increases in recidivism, we find positive social returns for juvenile record sealing expansions and dismissing marginal adult charges; raising the age of majority breaks even. Eliminating prison for first-time adult felony defendants, however, increases net social costs. Policymakers may still find this attractive if they are willing to value beneficiaries (taxpayers and defendants) slightly higher (124%) than potential victims.
    Keywords: juvenile and criminal justice, regression discontinuity, machine learning, recidivism, employment
    JEL: C36 C45 K14 K42 J24
    Date: 2023–01
  10. By: Lin William Cong; Simon Mayer
    Abstract: We model platform competition with endogenous data generation, collection, and sharing, thereby providing a unifying framework to evaluate data-related regulation and antitrust policies. Data are jointly produced from users' economic activities and platforms' investments in data infrastructure. Data improves service quality, causing a feedback loop that tends to concentrate market power. Dispersed users do not internalize the impact of their data contribution on (i) service quality for other users, (ii) market concentration, and (iii) platforms’ incentives to invest in data infrastructure, causing inefficient over- or under-collection of data. Data sharing proposals, user privacy protections, platform commitments, and markets for data cannot fully address these inefficiencies. We introduce and analyze user union, which represents and coordinates users, as a potential option for antitrust and consumer protection in the digital era.
    JEL: L10 L41 L50 O30
    Date: 2023–01
  11. By: Kazutoshi Kan (Director, Institute for Monetary and Economic Studies, Bank of Japan (E-mail:
    Abstract: In modern society where personal information has high industrial value, privacy protection is a mandatory prerequisite for utilizing the personal information. Differential privacy enables to achieve moderate privacy through quantifying the effectiveness of privacy -enhancing technologies. Many researchers have adopted differential privacy as a common and useful criterion in academic literatures regarding the privacy evaluation. This paper gives an overview of principles, laws, regulations, IT systems management, business practices, and privacy-enhancing technologies including ones based on differential privacy. It also explains the theory behind differential privacy and its application studies, and discusses the desirable privacy protection considering the strengths and limitations of the differential privacy. In particular, mathematical methodologies including ones based on differential privacy cannot solely suffice social demands for privacy protection, especially for the control over personal information about oneself. Desirable privacy protection for resolving the social issue should adopt a comprehensive approach that includes laws, regulations, IT systems management, business practices, as well as mathematical methodologies and information security.
    Keywords: Differential Privacy, Privacy Protection, Control over Personal Information about Oneself, Anonymization, Ethical, Legal and Social Issues
    JEL: Z00 K22
    Date: 2023–01
  12. By: Marwin Heinemann; Wojciech Stiller
    Abstract: The digitalization of transaction processes through tools such as electronic invoicing (e-invoicing) aims to improve tax compliance and reduce administrative costs. Another important aspect of digitalization is its potential to reduce tax evasion. We analyze the impact of the widely introduced e-invoicing in Italy on cross-border value-added tax fraud. As a proxy for this tax fraud, we make use of the discrepancy in trade data that is double-reported in both the importing and exporting country (trade gap). We calculate trade gaps based on product flows on the most detailed level between Italy and the remaining countries of the European Union. Our results suggest a significant decline in cross-border fraud in response to the introduction of mandatory e-invoicing, providing an important rationale for the application of this measure by other countries. Furthermore, we estimate that e-invoicing decreased the Italian revenue loss by €0.6 billion to €1 billion in 2019. This is in line with the statements of the Italian Ministry of Finance, which are probably based mainly on the revenue development. In this context, we underpin the suitability of the trade gap as an approach for the study of anti-fraud measures and provide a more accurate estimate of cross-border fraud. In addition, our study suggests that fraudsters shift their activities to similar products and drive honest traders out of the market.
    Keywords: e-invoicing, digitalization, international trade, VAT fraud, trade gap
    JEL: F14 H21 H26 K34 K40
    Date: 2023
  13. By: Nicolás Abbate (CEDLAS-IIE-FCE-UNLP); Bruno Jiménez (Princeton University & CEDLAS-IIE-FCE-UNLP)
    Abstract: In this paper, we evaluate a series of minimum wage hikes implemented in the early XXIst century in Argentina using administrative records of registered employment. We identify the effect of raising the minimum wage on job separations via a regression discontinuity design. More specifically, we compare the match destruction rates for a treatment group directly bound by the minimum wage hikes and a control group slightly out of its legal scope. We show that this method represents an improvement over previous ones because it reduces the incidence of Type-I error. We find that, when aggregated, these hikes had a precisely estimated zero effect on separation rates. However, the increases enacted in 2008 arise as an exception. They decreased separations by 4.8 percentage points (19%). These results suggest that the employment effects of minimum wages may not flow through employment destruction.
    JEL: J31 J80 K31
    Date: 2023–02
  14. By: Jerg Gutmann; Léa Marchal; Betül Simsek
    Abstract: This is the first global study of how institutionally entrenched gender discrimination affects the gender migration gap (GMG) using data on 158 origin and 37 destination countries over the period 1961-2019. We estimate a gravity equation derived from a random utility maximization model of migration that accounts for migrants’ gender. Instrumental variable estimates indicate that increasing gender equality in economic or political rights generally deepens the GMG, i.e., it reduces female emigration relative to that of men. In line with our theoretical model, this average effect is driven by higher-income countries. In contrast, increased gender equality in rights reduces the GMG in lower-income countries by facilitating female emigration.
    Keywords: discrimination, gender equality, individual rights, migration, RUM model
    JEL: F22 J16 J71 K38 O15 P48
    Date: 2023
  15. By: Gianluca Biggi
    Abstract: This study investigates the impact of the introduction of the European chemical regulation (the EU REACH legislation) on chemical search and innovation by focusing on the knowledge recombination processes leading to the generation of inventions. Using a novel dataset of patents and chemical structures contained therein over the period 1978-2016, this study readapts established patent indicators to capture the complexity, novelty, and novelty in recombination of the inventive activities as a result of the chemical regulation. The separate effect of the chemical regulation reflected in +39.8% of compounds per patent, +23% of new compounds per patent, and +2% of newer recombinations of compounds per patent is supported by the Propensity Score Matching estimations. The positive and significant effect of chemical regulation on compound patenting supports prior scholarly work on the idea that regulations by altering the search space, influence the rate and intensity of technological search and innovation.
    Keywords: Chemical inventions; Patent data; Regulation; Knowledge recombination.
    Date: 2023–01–25

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