nep-law New Economics Papers
on Law and Economics
Issue of 2024‒04‒29
five papers chosen by
Yves Oytana, Université de Franche-Comté

  1. Bankruptcy Lawyers and Credit Recovery By Brian Jonghwan Lee
  2. Local Crime and Prosocial Attitudes: Evidence from Charitable Donations By Carlo Perroni; Kimberly Scharf; Sarah Smith; Oleksandr Talavera; Linh Vi
  3. Incentives to Comply with the Minimum Wage in the US and UK By Stansbury, Anna
  4. Litigation and access to healthcare: an analysis of universal coverage and judges’ decision making criteria By Monge-Navarro, Daniela; Monge, Andrea N
  5. “Something Works” in U.S. Jails: Misconduct and Recidivism Effects of the IGNITE Program By Marcella Alsan; Arkey M. Barnett; Peter Hull; Crystal Yang

  1. By: Brian Jonghwan Lee
    Abstract: The author studies how bankruptcy law firm advertisements affect credit recovery of households in financial distress. Exploiting the border discontinuity strategy associated with the geographic unit in which local TV advertisements are sold, the author empirically uncovers bankruptcy filings and credit recovery related to exogenous variations in bankruptcy law firm advertisements. The author first documents a significant advertising effect on filing rates and shows that advertising-induced filers are similar to existing filers. The author then finds a positive effect of advertisements on credit outcomes including credit score, new homeownership, and foreclosure. The author interprets these findings as evidence that lawyers address information frictions in households’ assessment of the bankruptcy option.
    Keywords: Personal bankruptcy; lawyers; intermediaries; advertising
    JEL: G51 K35 M37
    Date: 2024–04–08
  2. By: Carlo Perroni (University of Warwick); Kimberly Scharf (University of Nottingham); Sarah Smith (University of Bristol); Oleksandr Talavera (University of Birmingham); Linh Vi (Aston University)
    Abstract: Combining longitudinal postcode-level data on charitable donations made through a UK giving portal with publicly available data on local crime and neighborhood characteristics, we study the relationship between local crime and local residents' charitable giving and we investigate the possible mechanisms underlying this relationship. An increase in local crime corresponds to a sizeable increase in the overall size of unscheduled charitable donations. This effect is mainly driven by the responses of female and gender unclassified donors. Donation responses also reflect postcode variation in socio-economic characteristics, levels of mental health, and political leanings, but mainly so for female and gender-unidentified donors.
    Keywords: Charitable Donations, Prosocial Behavior, Crime
    JEL: H41 D64 D91 J15
    Date: 2024–04
  3. By: Stansbury, Anna
    Abstract: There is substantial evidence of minimum wage noncompliance in the US and the UK. In this paper, I compile new, comprehensive data on the costs minimum wage violators incur when detected. In both countries, the costs violators face upon detection are often little more than the money they saved by underpaying. To have an incentive to comply under existing penalty regimes, typical US firms would thus have to expect a 47%-83% probability of detection by the DOL, or a 25% probability of a successful FLSA suit. In the UK, typical firms would have to expect a 44%-56% probability of detection. Actual probabilities of detection are substantially lower than this for many firms, and would likely remain so even with realistic increases in enforcement capacity. Improved enforcement alone is thus insufficient: expected penalties must also substantially increase to ensure that most firms have an incentive to comply. (Stone Center on Socio-Economic Inequality Working Paper)
    Date: 2024–03–26
  4. By: Monge-Navarro, Daniela; Monge, Andrea N
    Abstract: Public insurers face trade-offs between the individual and collective benefits they can provide given limited resources. Drug expenditure is one of the largest components of health spending and it is not clear cut what should be readily available. We study litigation as a safety valve using data from cancer drug requests filed in court in Costa Rica, a country with a universal healthcare system. As a standard, decisions on rationing are based on economic evaluations of health care, but a probit model to predict lawsuit success shows that higher benefit drugs do not have higher success probabilities even if this would be the desired outcome from the individual’s perspective. Marginal costs, which approximate cost-benefit ratios, do show a significant effect but of a smaller magnitude, making the Court differ from the public insurer’s rationing rule. Regarding social determinants of health, variables such as education, income and region don’t appear to generate a bias from judges. Moreover, as prevalence and mortality are commonly used to characterize diseases and their severity, we examine the types of cancers involved in litigation and assess whether healthcare coverage explains any patterns. Overall, no clear patterns emerge, indicating that the Court’s role in drug access complements the population-level rationing rules, addressing individual heterogeneity. For judges, the findings do not suggest a cautious approach for prevalent diseases, but they do place a high value on the probability of survival. So far this last factor appears the most relevant for Court rulings. Finally, an event study model shows that no drug or diagnosis guarantees lawsuit success, and past decisions do not significantly influence future ones, which is a common concern according to public opinion. This research sheds light on the complex decision-making process regarding drug access under a universal healthcare system and highlights the importance of balancing individual and collective well-being in resource allocation.
    Keywords: litigation, healthcare, drug-access, cost-effectiveness, prevalence, mortality
    JEL: D61 H40 I11 I13 I18 K41
    Date: 2023
  5. By: Marcella Alsan; Arkey M. Barnett; Peter Hull; Crystal Yang
    Abstract: A longstanding and influential view in U.S. correctional policy is that “nothing works” when it comes to rehabilitating incarcerated individuals. We revisit this hypothesis by studying an innovative law-enforcement-led program launched in the county jail of Flint, Michigan: Inmate Growth Naturally and Intentionally Through Education (IGNITE). We develop an instrumental variable approach to estimate the effects of IGNITE exposure, which leverages quasi-random court delays that cause individuals to spend more time in jail both before and after the program’s launch. Holding time in jail fixed, we find that one additional month of IGNITE exposure reduces within-jail misconduct by 49% and reduces three-month recidivism by 18%, with the recidivism effects growing over time. Surveys of staff and community members, along with administrative test score records and within-jail text messages, suggest that cultural change and improved literacy and numeracy scores are key contributing mechanisms.
    JEL: C26 I26 K4
    Date: 2024–03

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