nep-law New Economics Papers
on Law and Economics
Issue of 2023‒04‒10
ten papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Too Much of a Good Thing: Accelerated Growth and Crime By Soares, Rodrigo R.; Souza, Danilo
  2. Hit Where It Hurts: Healthcare Access and Intimate Partner Violence By Bellés Obrero, Cristina; Rice, Caoimhe T.; Castello, Judit Vall
  3. Prison, Mental Health, and Family Spillovers By Bhuller, Manudeep; Khoury, Laura; Loken, Katrine Vellesen
  4. Optimal Insurance: Dual Utility, Random losses and Adverse Selection By Alex Gershkov; Benny Moldovanu; Philipp Strack; Mengxi Zhang
  5. Designing Interrogations By Alessandro Ispano; Peter Vida
  6. The Effect of the Minimum Wage in Latin America's six largest economies By Lucía Ramírez Leira; Carlo Lombardo; Leonardo Gasparini
  7. The oscillating domains of public and private markets By Gözlügöl, Alperen A.; Greth, Julian; Tröger, Tobias
  8. The Effects of the Tax Cuts and Jobs Act on the Tax-Competitiveness of Multinational Corporations By Michael Overesch; Leon G. A. Reichert; Georg Wamser
  9. Coming Clean on Your Taxes By Sebastian Beer; Ruud de Mooij; Ruud A. De Mooij
  10. Rent Control Effects through the Lens of Empirical Research: An almost Complete Review of the Literature By Konstantin A. Kholodilin

  1. By: Soares, Rodrigo R. (Insper, São Paulo); Souza, Danilo (University of Sao Paolo)
    Abstract: We document that oil-producing areas of Brazil experienced increases in crime during the period of increased economic growth driven by the 2000s oil boom. This challenges the understanding that the impact of income shocks on crime is driven primarily by the legal status of the market in question. Offshore oil production, refining, and distribution in Brazil are concentrated in large firms, without scope for income contestability. We show that various equilibrium effects of the shock – such as increased inequality, urbanization, illegal goods presence, and deterioration in public goods provision – are likely to have contributed to the increase in crime.
    Keywords: crime, oil, income, Brazil
    JEL: H75 K42 Q34
    Date: 2023–03
  2. By: Bellés Obrero, Cristina (Barcelona Institute of Economics); Rice, Caoimhe T. (University of York); Castello, Judit Vall (University of Barcelona)
    Abstract: This paper investigates the causal link between healthcare access and the help-seeking behavior of intimate partner violence (IPV) victims. Healthcare access can be an important entry point for screening or detecting IPV. Doctors are required by law to report any injuries to a judge if they suspect they are the result of a crime and can inform and direct victims to IPV services. We exploit the 2012 reform in Spain that removed access to the public healthcare system for undocumented immigrants. We use court reports and protection order requests from the Judicial Branch of the Spanish government to perform a difference-in-differences approach, comparing the help-seeking behavior of foreign and Spanish women before and after the reform. We find that the impact of the reform was immediate; foreign women's IPV reporting and application for protection orders decreased by 12%. This effect is entirely driven by regions with stronger enforcement of the reform. We show suggestive evidence that the reform left the underlying levels of IPV incidence unaffected. Instead, the results are driven by a reduction in injury reports by medical centers. Our findings are important given the increase in migration flows globally as well as for current debates on granting/limiting access to healthcare for marginalized groups.
    Keywords: healthcare access, intimate partner violence, reporting, undocumented immigrants
    JEL: I10 I12 I14 I31
    Date: 2023–03
  3. By: Bhuller, Manudeep (University of Oslo); Khoury, Laura (Paris School of Economics); Loken, Katrine Vellesen (Norwegian School of Economics)
    Abstract: Does prison cause mental health problems among inmates and their family members? Correlational studies tend to find much higher prevalence of mental health problems among inmates than in the general population, but remain silent on the issue of causality. We combine detailed Norwegian data on visits to health-care professionals with quasi-experimental designs to measure the impacts of incarceration on mental health-related visits by defendants and their family members. Our causal evidence consistently shows that the positive correlation is misleading: incarceration in fact lowers the prevalence of mental health-related visits among defendants. Family members, especially spouses, also experience positive mental health spillovers, while there are fewer episodes of child protection services involvement. We demonstrate that these effects last long after release and are unlikely driven by shifts in health-care demand holding health status constant. We interpret these findings in light of the rehabilitative role of correctional services in the Norwegian context.
    Keywords: mental health, incarceration, family spillovers
    JEL: K42 I10 I18
    Date: 2023–03
  4. By: Alex Gershkov; Benny Moldovanu; Philipp Strack; Mengxi Zhang
    Abstract: We study a generalization of the classical monopoly insurance problem under adverse selection (see Stiglitz [1977]) where we allow for a random distribution of losses, possibly correlated with the agent’s risk parameter that is private information. Our model explains patterns of observed customer behavior and predicts insurance contracts most often observed in practice: these consist of menus of several deductible-premium pairs, or menus of insurance with coverage limits-premium pairs. The main departure from the classical insurance literature is obtained here by endowing the agents with risk-averse preferences that can be represented by a dual utility functional (Yaari [1987]).
    Keywords: digital platforms, Big Tech, market definition, multi-markets approach, German Competition Act, 19a designations, competition law
    JEL: K21
    Date: 2023–03
  5. By: Alessandro Ispano; Peter Vida (Université de Cergy-Pontoise, THEMA)
    Abstract: We provide a model of interrogations with two-sided asymmetric information. The suspect knows his status as guilty or innocent and the likely strength of the law enforcer’s evidence, which is informative about the suspect’s status and may also disprove lies. We compare prosecution errors in the equilibrium of the one-shot interrogation and in the optimal mechanism under full commitment. We describe a “back and forth” interrogation with disclosure of the evidence and discretionary forgiveness of lies that implements the optimum in equilibrium without any commitment.
    Keywords: lie, evidence, questioning, confession, law, prosecution, disclosure, persuasion, two-sided asymmetric information
    JEL: D82 D83 C72 K40
    Date: 2023
  6. By: Lucía Ramírez Leira; Carlo Lombardo; Leonardo Gasparini
    Keywords: Minimum Wage, Wages, Labor Markets, Inequality, Informality, Latin America
    JEL: J22 J38 J31 K31
    Date: 2021–11
  7. By: Gözlügöl, Alperen A.; Greth, Julian; Tröger, Tobias
    Abstract: We contribute to the debate about the future of capital markets and corporate finance, which has ensued against the background of a significant boom in private markets and a corresponding decline in the number of firms and the amount of capital raised in public markets in the US and Europe. Our research sheds light on the fluctuating significance of public and private markets for corporate finance over time, and challenges the conventional view of a linear progression from one market to the other. We argue instead that a more complex pattern of interaction between public and private markets emerges, after taking a long-term perspective and examining historical developments more closely. We claim that there is a dynamic divide between these markets, and identify certain factors that determine the degree to which investors, capital, and companies gravitate more towards one market than the other. However, in response to the status quo, other factors will gain momentum and favor the respective other market, leading to a new (unstable) equilibrium. Hence, we observe the oscillating domains of public and private markets over time. While these oscillations imply 'competition' between these markets, we unravel the complementarities between them, which also militate against a secular trend towards one market. Finally, we examine the role of regulation in this dynamic divide as well as some policy implications arising from our findings.
    Keywords: corporate finance, capital markets, public markets, private markets, private equity, securities regulation, financial regulation
    JEL: D53 G1 G3 K22
    Date: 2023
  8. By: Michael Overesch; Leon G. A. Reichert; Georg Wamser
    Abstract: We exploit the 2017 US tax reform to learn about the tax-competitiveness of US multinational corporations (MNCs) relative to their international peers. Matching on the propensity score, we compare pairs of similar US and European firms listed on the S&P500 or StoxxEurope600 in a difference-in-differences setting. Our results suggest significantly lower effective tax rates of US MNCs compared to their European competitors after the US tax reform. Additional tests show (i) that US MNCs have gained substantially in what we call tax-competitiveness, (ii) that the reform effect is more pronounced for MNCs with a high share of domestic activity, and (iii) that the tax reform did not change the international tax-planning behavior of US MNCs. We provide evidence that US MNCs already successfully engaged in international tax planning prior to the reform, and this behavior is unchanged after the tax reform.
    Keywords: effective tax rate, tax reform, tax-competitiveness, tax avoidance, pair matching, difference-in-differences analysis, profit shifting
    JEL: H25 H26 K34
    Date: 2023
  9. By: Sebastian Beer; Ruud de Mooij; Ruud A. De Mooij
    Abstract: This paper develops a simple model to explore whether a higher detection probability for offshore tax evaders—e.g., because of improved exchange of information between countries and/or due to digitalization of tax administrations—renders it optimal for governments to introduce a voluntary disclosure program (VDP) and, if so, under what terms. We find that if the VDP is unanticipated, it is likely to be optimal for a revenue-maximizing government to introduce a VDP with relatively generous terms, i.e., a low or even negative penalty. When anticipated, however, the VDP is neither incentive compatible nor optimal, as it induces otherwise compliant taxpayers to evade tax. A VDP can then only be beneficial if tax evasion induces an external social cost beyond the direct revenue foregone, e.g., due to adverse effects on overall tax morale. In contrast to the common view that VDPs should come along with additional enforcement effort, we find that governments should relax enforcement if the VDP itself provides more powerful incentives to come clean.
    Keywords: tax evasion, voluntary disclosure program, tax amnesty
    JEL: H26
    Date: 2023
  10. By: Konstantin A. Kholodilin
    Abstract: Rent control is a highly debated social policy that has been omnipresent since World War I. Since the 2010s, it is experiencing a true renaissance, for many cities and countries facing chronic housing shortages are desperately looking for solution, directing their attention to controling housing rents and other restrictive policies. Is rent control useful or does it create more damage than utility? To answer this question, we need to identify the effects of rent control. This study reviews a large empirical literature looking at various aspects of rent controls. We conclude that rent controls are quite effective in terms of lowering housing rents or slowing their growth, but they also lead to a wide range of adverse effects affecting both landlords and tenants.
    Keywords: Rent control, housing policy, empirical literature review
    JEL: K25 N90 R38
    Date: 2022

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