nep-law New Economics Papers
on Law and Economics
Issue of 2023‒05‒29
eleven papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Prison rehabilitation programs and recidivism: evidence from variations in availability By Steeve Marchand; Guy Lacroix; William Arbour
  2. Leader Characteristics and Constitutional Compliance By Gutmann, Jerg; Metelska-Szaniawska, Katarzyna; Voigt, Stefan
  3. A Legal-Technical Basis for a Computational Transatlantic Trade and Investment Partnership (TTIP) Agreement By Atkinson, Craig
  4. Greening our Laws: Revising Land Acquisition Law for Coal Mining in India By Sugandha Srivastav; Tanmay Singh
  5. When Crime Tears Communities Apart: Social Capital and Organised Crime By Calamunci, Francesca Maria; Frattini, Federico Fabio
  6. Diffusion of OECD Transfer Pricing Regulations in Eastern Africa: Agency and Compliance in Governing Profit-Shifting Behaviour By Vet, Cassandra
  7. Driving, Dropouts, and Drive-Throughs: Mobility Restrictions and Teen Human Capita By Valerie Bostwick; Christopher Severen
  8. Sanction Enforcement among Third Parties:New Experimental Evidence from Two Societies By Kenju Kamei; Smriti Sharma; Matthew J. Walker
  9. Enforcing Mandatory Reporting on Private Firms: The Role of Banks By Miguel Duro; Germán López-Espinosa; Sergio Mayordomo; Gaizka Ormazabal; María Rodríguez-Moreno
  10. Does Voluntary Non-earnings Disclosure Substitute for Redacted Proprietary Contract Information? By Barth, Mary E.; Landsman, Wayne R.; Tian, Xiaoli (Shaolee); Yu, Miaomiao
  11. Tax policies, informality, and real wage rigidities By Andres García-Suaza; Fernando Jaramillo; Marlon Salazar

  1. By: Steeve Marchand (Melbourne Institute: Applied Economic & Social Research, The University of Melbourne); Guy Lacroix (Department of Economics, Universit´e Laval); William Arbour (Department of Economics, University of Toronto)
    Abstract: Increasing evidence suggests that incarceration can improve the social reintegration of inmates in some circumstances. Yet, the mechanisms through which incarceration may favor rehabilitation remain largely unknown. This paper exploits variations in program availability in Quebec (Canada) to estimate their effects on recidivism. We find that reintegration programs can substantially decrease the probability of future incarceration. However, this is mitigated by an increase in the probability of future community sentences, though these are associated with less serious offenses. Programs addressing self-development, violent behavior, or education and employment deficiencies exhibit strong effects. Conversely, those focusing on addiction issues and other program types are not found to affect recidivism. These results suggest that specific rehabilitation programs can explain the beneficial effects of incarceration found in the literature.
    Keywords: incarceration, recidivism, rehabilitation programs
    JEL: K42
    Date: 2023–05
  2. By: Gutmann, Jerg; Metelska-Szaniawska, Katarzyna; Voigt, Stefan
    Abstract: While research in constitutional economics has made important progress in recent decades, the factors determining whether a constitution is complied with have only received scant attention. We contribute to that narrow literature by studying how personal traits of political leaders are associated with constitutional compliance. Compliance levels of 943 political leaders between 1950 and 2010 can be explained by their education, entry into office, political experience, military background, and whether they are members of extreme left-wing parties. Specifically, under former military officers and Communist leaders, constitutional compliance is significantly lower. The combined effect of these two traits corresponds to the difference between democracy and nondemocracy. This implies a difficult normative question, which we discuss in our conclusion: Should constitutions set entry barriers for high political offices that are based on leader characteristics?
    Keywords: constitutional compliance, de jure-de facto gap, leader characteristics
    JEL: K10 K38 K42 P16 P26 P48 Z10
    Date: 2023
  3. By: Atkinson, Craig
    Abstract: With the emergence of new modes of governance, the article specifies a legal-technical basis – background, analytical structure, sources, methods, and research questions – to advance the notion of a ‘computable’ transatlantic trade agreement.
    Abstract: Applications of Computational Law (CompLaw) are emerging that allow for the expression and online publication of digital versions of rules as algorithms to improve accessibility for humans and support operationalization via machines. As instruments begin to refer to governance for, of, and by information and communications technology (ICT), this article introduces public and private branches of law to construct a five-point legal-technical basis for a Transatlantic Trade and Investment Partnership (TTIP) 'version 2.0' with computational rules (and data sources) in parallel to its natural language, other texts, and associated systems. First, the nature of the European Union (EU)-United States (US) relationship is described in the age of Computational Law and the Internet. Second, the analysis explores the ‘multilateral interface’ and proposals under the World Trade Organization (WTO) Joint Initiative on E-commerce. Third, existing and envisaged sources of EU and US trade, business, technology, and privacy law are compared. Fourth, the investigation frames institutional sources of transnational commercial law, including the principles, conventions, and model laws of the United Nations Commission on International Trade Law (UNCITRAL) and the International Institute for the Unification of Private Law (UNIDROIT). Fifth, technical requirements to seize the CompLaw opportunity for transatlantic trade are articulated. Outputs of the specified analytical structure are set to contribute to the advancement of legal informatics at the nexus of EU-US trade and technology policy regimes. Article by Craig Atkinson, WTI Non-Resident Fellow and Visiting Scholar at Singapore Management University's Yong Pung How School of Law, published by the Stanford –Vienna Transatlantic Technology Law Forum in the Transatlantic Antitrust and IPR Developments Newsletter Issue No. 1/2023 (May 12, 2023), pp. 31-37 (open access).
    Date: 2023–05–16
  4. By: Sugandha Srivastav; Tanmay Singh
    Abstract: Laws that govern land acquisition can lock in old paradigms. We study one such case, the Coal Bearing Areas Act of 1957 (CBAA) which provides minimal social and environmental safegaurds, and deviates in important ways from the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013 (LARR). The lack of due diligence protocol in the CBAA confers an undue comparative advantage to coal development, which is inconsistent with India's stance to phase down coal use, reduce air pollution, and advance modern sources of energy. We argue that the premise under which the CBAA was historically justified is no longer valid due to a significant change in the local context. Namely, the environmental and social costs of coal energy are far more salient and the market has cleaner energy alternatives that are cost competitive. We recommend updating land acquisition laws to bring coal under the general purview of LARR or, at minimum, amending the CBAA to ensure adequate environmental and social safeguards are in place, both in letter and practice.
    Date: 2023–04
  5. By: Calamunci, Francesca Maria; Frattini, Federico Fabio
    Abstract: What is the long-term effect of organised crime presence on social capital accumulation? By leveraging novel social capital and organised crime data, this study investigates this question within the Italian landscape. In an instrumental variable (IV) setting, we exploit the forced resettlement law that compelled organised crime members living in the South of Italy to resettle in the Centre-North area. Using a granular measure of tax compliance as a proxy for civic awareness, we find evidence that sustained exposure to mafia presence depresses social capital accumulation. This finding applies to other dimensions of social capital, such as civic engagement and political participation. Results are robust to a series of robustness checks, such as the alternative strategy which combines the migratory movements from the South and the allocation of Marshall Plan funds. The findings appear to be influenced by a tolerance of dishonest conduct, a decrease in institutional trust, and a general disengagement from social activities.
    Keywords: Community/Rural/Urban Development, Labor and Human Capital, Research Methods/ Statistical Methods
    Date: 2023–05–03
  6. By: Vet, Cassandra
    Abstract: Kenya, Uganda and Rwanda introduced transfer pricing regulations into national law in 2006, 2011 and 2020 respectively, and invested in transfer pricing audits to reduce profit shifting by multinational enterprises (MNEs). These countries used the dominant OECD transfer pricing guidelines as a template for reform – the wisdom of this approach is contested. Critical authors stress that Western states largely dominate rule-setting procedures, and that costly transfer pricing enforcement drains the scarce resources of revenue authorities. How can we reconcile the critical perspective in global debates with the roll-out of OECD-type transfer pricing regimes on the ground?
    Keywords: Governance,
    Date: 2023
  7. By: Valerie Bostwick; Christopher Severen
    Abstract: We provide evidence that graduated driver licensing (GDL) laws, originally intended to improve public safety, impact both high school completion and teen employment. Many teens use automobiles to commute both to school and to employment. Because school and work decisions are interrelated, the effects of automobile-specific mobility restrictions are ex ante ambiguous. Combining variation in the timing of both GDL law adoption and changes in compulsory school laws into a triple-difference research design shows that restricting teen mobility significantly reduces high school dropout rates and teen employment. These findings are consistent with a model in which teens use automobiles to access educational distractions (employment or even risky behaviors). We develop a discrete choice model that reflects reduced access to school, work, and other activities, which reveals that limiting access to work alone cannot explain the reduction in high school dropout rates.
    Keywords: Mobility Restrictions; Human Capital; Teen Employment; GDL Laws; Multiple Discreteness
    JEL: J24 I20 J22 R48 C35
    Date: 2022–08–17
  8. By: Kenju Kamei (Faculty of Economics, Keio University); Smriti Sharma (Business School, Newcastle University); Matthew J. Walker (Business School, Newcastle University)
    Abstract: Sanction enforcement offers the potential to mitigate free riding on punishment among multiple third parties. This paper experimentally studies third-party enforcement of social norms in a prisoner fs dilemma game with and without opportunities for higher-order punishment. Based on insights from the literature on cooperation, kinship and moral systems, we compare people fs sanction enforcement across student subjects in two societies: India and the United Kingdom. The experiment results show that, in both societies, third parties f first-order punishment is most severe for defectors and that a third party fs failure to punish a defector invites higher-order punishment from their fellow third parties. These findings are consistent with a model of social preferences and literature from anthropology and theoretical biology. Further, third-party punishment is stronger in the UK than in India, consistent with the conjecture that people in a society with relatively looser ancestral kinship ties are more willing to engage in pro-social punishment. However, in contrast to the theory or conjecture, there is clear difference in the group size effects between the two research sites: whereas third parties free ride on others f punitive acts in the UK, they punish more when in the presence of other third parties in India.
    Keywords: Experiment, Third-party punishment, Higher-order, Cross-societal variation, Public Goods
    JEL: C92 H41 D01 D91
    Date: 2023–04–26
  9. By: Miguel Duro (IESE Business School); Germán López-Espinosa (School of Economics - Universidad de Navarra and IESE Business School); Sergio Mayordomo (Banco de España); Gaizka Ormazabal (IESE Business School, CEPR and ECGI); María Rodríguez-Moreno (Banco de España)
    Abstract: This paper studies firm-level factors shaping the enforcement of financial reporting regulation on private firms and proposes bank lending as a particularly important one. Our tests are based on a rare combination of data sets, which allows us to construct unique measures of misreporting, notably in the form of underreporting of debt. We observe that private firms with bank debt are more likely to file mandatory financial reports and less likely to file information with irregularities. While we also find evidence that the need for bank financing can induce firms to misreport, this concern is mitigated by additional findings suggesting that banks detect reporting issues within private firms’ financial statements. Critically, we observe that firms with reporting issues obtain significantly less credit, especially when the bank has had previous exposure to debt misreporting and when the bank verifies debt information using the public credit registry. In short, our paper documents important firm-level determinants of private firms’ misreporting and highlights that banks play a significant role in the enforcement of mandatory financial reporting on these firms.
    Keywords: enforcement of financial reporting, private firms, debt underreporting, financial distress, public credit registries
    JEL: G21 M41
    Date: 2022–11
  10. By: Barth, Mary E. (Stanford U); Landsman, Wayne R. (U of North Carolina at Chapel Hill); Tian, Xiaoli (Shaolee) (Georgetown U); Yu, Miaomiao (Louisiana State U)
    Abstract: This study finds that voluntary non-earnings disclosures substitute for redacted proprietary contract information. When firms redact contract information, they provide more voluntary disclosures and have higher information uncertainty and asymmetry. Although firms provide both voluntary non-earnings and earnings disclosures when they redact contract information, only non-earnings disclosures in Forms 8-K mitigate the higher information uncertainty and asymmetry associated with redaction. These findings suggest earnings disclosures may not be specific enough to substitute for redacted contract information and contrast with the presumption in related research that firms provide earnings disclosures to substitute for withheld proprietary information. Our inferences particularly apply to research and development and license contracts, which are more likely to contain proprietary information that also is relevant to investors. Taken together, our study's evidence can be informative to the SEC in its consideration of the effects of reducing mandatory disclosure on information available to investors.
    JEL: D8 M41 M48
    Date: 2022–09
  11. By: Andres García-Suaza; Fernando Jaramillo; Marlon Salazar
    Abstract: Developing countries have a vast informal sector generally associated with low productivity levels. The response of informal employment to tax policies might depend on labor market rigidities. This paper proposes a theoretical framework consisting of a search and matching model with segmentation in the labor market to understand how tax policies and enforcement interact to determine the size of the formal sector. The analytical results show that decreasing payroll taxes increases formal employment demand, and enforcement expenditure decreases informal employment offers. The model suggests that a tax policy combination leads to a significant impact on informality reduction. Moreover, the magnitude of the effect of tax policies depends on real wage rigidities, i.e., when the economy faces high real wage rigidities, the tax policies have a higher effect on informality reduction
    Keywords: Informality, payroll taxes, fiscal policy, enforcement, search frictions, shirking, developing countries.
    JEL: E26 E62 J21 J46 J31 O17 K42
    Date: 2023–04–28

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