nep-law New Economics Papers
on Law and Economics
Issue of 2023‒02‒27
fourteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Taking the biscuit: how Safari privacy policies affect online advertising By Mateusz Mysliwski; Lars Nesheim; Simeon Duckworth
  2. The Comparative Constitutional Compliance Database By Jerg Gutmann; Katarzyna Metelska-Szaniawska; Stefan Voigt
  3. Criminal Charges, Risk Assessment, and Violent Recidivism in Cases of Domestic Abuse By Black, Dan A.; Grogger, Jeffrey; Kirchmaier, Tom; Sanders, Koen
  4. Why are Mexican politicians being assassinated?: The role of oil theft and narcocracy and the electoral consequences of organized crime By Roxana Gutiérrez-Romero; Nayely Iturbe
  5. Does School Choice Leave Behind Future Criminals? By Andrew Bibler; Stephen B. Billings; Stephen L. Ross
  6. How pervasive is corporate fraud? By Dyck, Alexander; Morse, Adair; Zingales, Luigi
  7. Legal status and voluntary abortions by immigrants. By Luca Pieroni; Melcior Rosselló Roig; Luca Salmasi; Gilberto Turati
  8. Governing knowledge and technology: Technological pressure for convergence in EU, California, and China data protection regulation By Moreira, Hugo
  9. Measuring peer effects in parental leaves: evidence from a reform. By Davide Dottori; Francesca Modena; Giulia Martina Tanzi
  10. Taming Overconfident CEOs Through Stricter Financial Regulation By Bernhard Kassner
  11. Shelving or developing? The acquisition of potential competitors under financial constraints By Chiara Fumagalli; Massimo Motta; Emanuele Tarantino
  12. What Drives Paternity Leave: Financial Incentives or Flexibility? By Ziegler, Lennart; Bamieh, Omar
  13. The Value of a Green Card in the U.S. Marriage Market: A Tale of Chain Migration? By Bansak, Cynthia; Dziadula, Eva; Zavodny, Madeline
  14. Limitations of implementing an expected credit loss model By Bischof, Jannis; Haselmann, Rainer; Kohl, Frederik; Schlueter, Oliver

  1. By: Mateusz Mysliwski; Lars Nesheim; Simeon Duckworth
    Abstract: Many controversies that beset the digital economy turn on the role of advertising and its use of personal data. We examine the trade-off between privacy and ad targeting accuracy from the advertisers’ perspective. By exploiting Apple’s gradual restriction, and ultimately the abolition of ad tracking in its Safari browser called Intelligent Tracking Prevention (ITP), we analyse how much advertisers are willing to pay for third-party cookies and how tightening privacy policies affect market outcomes. Our empirical strategy treats Apple’s policy change as an exogenous shock to the supply of tracking opportunities and uses a series of event study models to estimate its causal impact. Our novel dataset on billions of online ads spans multiple countries, advertisers, and websites, allowing for a thorough heterogeneity analysis. We find that the estimated treatment effects around the ITP introduction dates are small in magnitude, differ across countries and vary by campaign and type of marketplace. This finding contrasts with anecdotal industry evidence that ads in Safari are sold at a significant markdown relative to other browsers. Moreover, our result suggests that the market failed to adjust immediately to a new, more privacy-sensitive equilibrium.
    Date: 2023–02–09
  2. By: Jerg Gutmann; Katarzyna Metelska-Szaniawska; Stefan Voigt
    Abstract: This article introduces a novel database that measures governments’ compliance with national constitutions. It combines information on de jure constitutional rules with data on their de facto implementation. The individual compliance indicators can be grouped into four categories that we aggregate into an overall indicator of constitutional compliance: property rights and the rule of law, political rights, civil rights, and basic human rights. The database covers 175 countries over the period 1900 to 2020 and can be used by researchers interested in studying the determinants or the effects of (non)compliance with constitutions. Our investigation of the stylized facts of constitutional compliance reveals a long-term increase in compliance, which occurred primarily around the year 1990. The Americas experienced the steepest increase in compliance, but also Africa and Europe improved particularly at the end of the Cold War. Democracies ― particularly those with parliamentary and mixed systems ― show more constitutional compliance than nondemocracies, among which military dictatorships perform the worst. Constitutional design also matters: Constitutions that allow for the dismissal of the head of state or government for violating constitutional rules are being complied with more.
    Keywords: constitutional compliance, constitutional economics, constitutional political economy, de jure-de facto gap, governance indicators, measurement of institutions
    JEL: H11 K10 K38 K42 O57 P48
    Date: 2023
  3. By: Black, Dan A. (University of Chicago); Grogger, Jeffrey (University of Chicago); Kirchmaier, Tom (Copenhagen Business School); Sanders, Koen (LSE)
    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.
    Keywords: domestic abuse, charges, risk assessment, propensity score weighting
    JEL: J12
    Date: 2023–01
  4. By: Roxana Gutiérrez-Romero; Nayely Iturbe
    Abstract: When does organized crime resort to assassinating politicians? In narcocracies, criminal groups co-opt political elites through bribery in exchange for protection to traffic illegal drugs. When criminal groups compete, they may also resort to political violence to influence which candidate wins local elections in strategic areas and retaliate when state action threatens their survival.
    Keywords: Crime, Drug trafficking, Political violence, Voter turnout
    Date: 2023
  5. By: Andrew Bibler (University of Nevada, Las Vegas); Stephen B. Billings (University of Colorado); Stephen L. Ross (University of Connecticut)
    Abstract: School choice lotteries are an important tool for allocating access to high-quality and oversubscribed public schools. While prior evidence suggests that winning a school lottery decreases adult criminality, there is little evidence for how school choice lotteries impact non-lottery students who are left behind at their neighborhood school. We leverage variation in actual lottery winners conditional on expected lottery winners to link the displacement of middle school peers to adult criminal outcomes. We find that non-applicant boys are more likely to be arrested as adults when applicants from their neighborhood win the school choice lottery. These effects are concentrated among boys who are at low risk of being arrested based on observables. Finally, we confirm evidence in the literature that students who win the lottery decrease adult criminality but show that after accounting for the negative impact on the students who forego the lottery, lotteries increase overall arrests and days incarcerated for young men.
    Keywords: School Choice Lotteries, Students Left Behind, Arrest, Crime, Middle School, Neighborhood Effects, Peers
    JEL: I24 I28 K42 R23
    Date: 2023–01
  6. By: Dyck, Alexander; Morse, Adair; Zingales, Luigi
    Abstract: We provide a lower-bound estimate of the undetected share of corporate fraud. To identify the hidden part of the "iceberg, " we exploit Arthur Andersen's demise, which triggered added scrutiny on Arthur Andersen's former clients and thereby increased the detection likelihood of preexisting frauds. Our evidence suggests that in normal times only one-third of corporate frauds are detected. We estimate that on average 10% of large publicly traded firms are committing securities fraud every year, with a 95% confidence interval of 7%-14%. Combining fraud pervasiveness with existing estimates of the costs of detected and undetected fraud, we estimate that corporate fraud destroys 1.6% of equity value each year, equal to $830 billion in 2021.
    Keywords: Corporate governance, Corporate fraud, Detection likelihood, Cost-beneft analysis, Securities regulation, Arthur Andersen
    JEL: G30 G34 K22 M40
    Date: 2023
  7. By: Luca Pieroni; Melcior Rosselló Roig; Luca Salmasi (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore); Gilberto Turati (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore)
    Abstract: We estimate the effect of granting legal status to immigrant women on voluntary abortions. We exploit the 2007 EU enlargement as an exogenous shock to legal status for Romanian and Bulgarian women, considering Italy as a destination country. Using a standard Difference-in-Differences model, we estimate a decline between 60% and 70% in voluntary pregnancy termination (VPT) rates for the new EU citizens from the two Eastern countries. We also introduce a novel framework to separate the total effect of the enlargement into a “citizenship” effect due to (legal or illegal) migrants already present in Italy and a “selection” effect due to new flows of immigrants. We show that the findings are robust to several alternative explanations. The drop in abortions points to legal status as a way to empower immigrant women.
    Keywords: Immigration, Abortions, Legal status, EU Enlargement.
    JEL: F22 K37 I12 J13
    Date: 2023–01
  8. By: Moreira, Hugo
    Abstract: This study employs a historical comparative methodology to explain the emergence time frame of comprehensive data protection regulations in Europe, the United States, and China. The study marks the beginning of the big data era in 2010 and explains the variation in the emergence of data protection regulations by examining the international problem-solving landscape, societal institutional organization, and individual interactions pressures. The EU's General Data Protection Regulation (GDPR) has had a significant impact on the alignment of regulations in other countries and the behavior of the private sector in terms of regulatory compliance. The California Consumer Privacy Act (CCPA) in the United States is a response to a growing social movement against corporativism and the abuse of personal data by large companies. The Personal Information Protection Law (PIPL) in China focuses on international data sovereignty and aims to protect the personal information of Chinese citizens from foreign companies and countries. Overall, the data protection case shows that when new technologies emerge, there is a natural tendency for regulatory convergence. The GDPR is an example of a regulatory solution that has been successfully propagated, due to the EU strong institutional reaction to new circumstances and ability to negotiate with all parties to create solutions for complex problems.
    Date: 2023–01–27
  9. By: Davide Dottori (Bank of Italy); Francesca Modena (Bank of Italy); Giulia Martina Tanzi (Bank of Italy)
    Abstract: In this paper we estimate peer effects in parental leaves (PLs), analyzing whether mothers' choices may be influenced by prior decisions made by their female colleagues. We identify peer effects through an exogenous variation in the probability that peers take a PL driven by a reform implemented in Italy in 2015 which extended the time period over which parents can receive a paid PL, providing greater flexibility in its use. We focus on post-reform mothers and exploit the heterogeneity in the share of their peers who, due to their children's age, have been affected by the reform. Our findings show the existence of important peer effects: a 10 percentage point increase in the share of peers that took a PL in response to the reform results in mothers being 2.4 percentage points more likely to take a PL. We also find a positive effect on the amount of PLs taken and a negative effect on the probability of working part-time. As suggested by the heterogeneity analysis, signalling about employers' reaction to the use of PLs might be an important channel through which peer effects unfold.
    Keywords: Peer effects, parental leave, Italy
    JEL: C31 J13 J22 D04 K31
    Date: 2023–02
  10. By: Bernhard Kassner (LMU Munich)
    Abstract: A large body of literature finds that managerial overconfidence increases risk-taking by financial institutions. This paper shows that financial regulation can be effective at mitigating this type of risk. Exploiting regulatory changes introduced after the financial crisis as a natural experiment, I find that overconfidence-induced risk-taking decreases in financial institutions subject to stricter regulation. Following the easing of these regulations, overconfidence-induced risk-taking increases again. These findings confirm the effectiveness of financial regulation at correcting overconfident behavior, but also suggest that the impact fades away quickly once removed.
    Keywords: overconfidence; risk; regulation; financial sector;
    JEL: G28 G32 G38 G40
    Date: 2023–01–27
  11. By: Chiara Fumagalli; Massimo Motta; Emanuele Tarantino
    Abstract: A start-up and an incumbent negotiate over an acquisition price under asymmetric information about the start-up’s ability to succeed in the market. The acquisition may result in the shelving of the start-up’s project or the development of a project that would otherwise never reach the market because of financial constraints. Despite this possible pro-competitive effect, the optimal merger policy commits to standards of review that prohibit high-price takeovers, even if they may be welfare-beneficial ex post. Ex ante this pushes the incumbent to acquire startups lacking the financial resources to develop independently, and increases expected welfare. Keywords: Optimal merger policy, selection effect, nascent competitors. JEL Classification: L41, L13, K21
    Date: 2022
  12. By: Ziegler, Lennart (University of Vienna); Bamieh, Omar (University of Vienna)
    Abstract: Despite changing gender norms, few fathers decide to take parental leave after the birth of a child, and when they do, their leave spells are substantially shorter compared to mothers. This study examines how paternal leave-taking is affected by two key features of leave policies: flexibility in leave duration and financial incentives. To disentangle their impact, we exploit recent changes to the Austrian parental leave system, which initially offered flat monthly benefits for 36 months after childbirth. The first reform added considerably shorter leave options; the second reform introduced income-dependent benefits, increasing net income replacement rates to 80 percent. Using a regression discontinuity design based on eligibility cutoff dates, we find that both reforms had a strong impact on leave take-up of fathers. The availability of shorter leave options increased leave-taking by 23 percent, while the introduction of income-dependent benefits raised take-up by another 13 percent relative to pre-reform means. Despite these increases, the share of leave taken by fathers relative to mothers remained similar. Comparing the impact of the two reforms across different income groups, we conclude that higher flexibility is more effective than stronger financial compensation in raising the number of leave-taking fathers.
    Keywords: parental leave, gender differences, childcare, financial incentives, labor supply, return to work
    JEL: J12 J13 J18 J22 I38
    Date: 2023–01
  13. By: Bansak, Cynthia; Dziadula, Eva; Zavodny, Madeline
    Abstract: This study examines the impact of having a clear path to lawful permanent resident status, or a "green card, " and naturalized citizenship on marital status and spousal characteristics among Chinese immigrants in the United States. A series of U.S. policy changes in the early 1990s made all mainland Chinese immigrants already present in the country eligible for a green card. We examine the effect of those policy changes on Chinese immigrants' marriage market outcomes relative to other East Asian immigrants. Using 1990 and 2000 U.S. Census data, we find that the share of Chinese immigrants who are married increased after they became automatically eligible for a green card. In particular, highly educated Chinese immigrants became relatively more likely to be married with a spouse living with them and relatively less likely to be married with a spouse living elsewhere. This pattern suggests that some Chinese spouses immigrated after their husband or wife received legal status, or spousal chain migration occurred. We also find that highly educated Chinese immigrants benefited in the marriage market in terms of spousal education and earnings, but less-educated Chinese immigrants did not. Meanwhile, less-educated Chinese-born women became relatively more likely to marry a U.S. native.
    Keywords: immigration, marriage markets, assortative matching, legal status, China
    JEL: J12 J15 K37
    Date: 2023
  14. By: Bischof, Jannis; Haselmann, Rainer; Kohl, Frederik; Schlueter, Oliver
    Abstract: The loan impairment rules recently introduced by IFRS 9 require banks to estimate their future credit losses by using forward-looking information. We use supervisory loan-level data from Germany to investigate how banks apply their reporting discretion and adjust their lending upon the announcement of the new rules. Our identification strategy exploits a cut-off for the level of provisions at the investment grade threshold based on banks' internal rating of a borrower. We find that banks required to adopt the new rules assign better internal ratings to exactly the same borrowers compared to banks that do not apply IFRS 9 around this cut-off. This pattern is consistent with a strategic use of the increased reporting discretion that is inherent to rules requiring forward-looking loss estimation. At the same time, banks also reduce their lending exposure to exactly those borrowers at the highest risk of experiencing a rating downgrade below the cutoff. These loans would be associated with additional provisions in future periods, both in the intensive and extensive margin. The lending change thus mitigates some of the negative effects of increased reporting opportunism on banks' crisis resilience. However, when these firms with internal ratings around the investment grade cut-off obtain less external funding through banks, the introduction of IFRS 9 will likely also be associated with real economic effects.
    Keywords: Bank Accounting, CECL, Expected credit losses, IFRS 9, Impairments, Loans
    JEL: G01 G21 G28 K23 M41
    Date: 2022

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