nep-law New Economics Papers
on Law and Economics
Issue of 2024‒05‒13
twelve papers chosen by
Yves Oytana, Université de Franche-Comté

  1. Digital Technologies for Better Enforcement of Waste Regulation and Elimination of Waste Crime By Nancy Isarin; Eva Barteková; Andrew Brown; Peter Börkey
  2. Social Assistance and Refugee Crime By Daniel Auer; Michaela Slotwinski; Achim Ahrens; Dominik Hangartner; Selina Kurer; Stefanie Kurt; Alois Stutzer
  3. Dynamic competition, exclusionary and exploitative abuses, and article 102 TFEU: Towards a concept of systemic market power? By Budzinski, Oliver; Stöhr, Annika
  4. Incentives to Comply with the Minimum Wage in the US and UK By Stansbury, Anna
  5. Legalization and Long-Term Outcomes of Immigrant Workers By Claudio Deiana; Ludovica Giua; Roberto Nisticò
  6. Lost in translation: Legislative drafting and judicial discretion By Madhav Goel; Renuka Sane
  7. To Burn a Slum: Urban Land Conflicts and the Use of Arson against Favelas By Rafael Pucci
  8. Price effects of horizontal mergers: A retrospective on retrospectives By Stöhr, Annika
  9. Mafias and Firms By Jaime Arellano-Bover; Marco De Simoni; Luigi Guiso; Rocco Macchiavello; Domenico J. Marchetti; Mounu Prem
  10. Licensed Professionals and Corporate Board Performance: The Effect of the Sarbanes-Oxley Act on the Audit Committee By Ben Posmanick; Alex Obie; Bobby Chung
  11. Financial regulation in sport championships as an anticompetitive institution By Budzinski, Oliver
  12. Internet piracy and book sales: a field experiment By Wojciech Hardy; Michał Krawczyk

  1. By: Nancy Isarin; Eva Barteková; Andrew Brown; Peter Börkey
    Abstract: Waste crimes create social and economic issues. Offenders commit crime due to either a lack of awareness of waste law or the belief that there is a low risk of being caught and punished. OECD countries are using digital tools to improve their use of resources with the aim to promote compliance and detect violation of waste law. This paper reviews the types of waste crimes, their motivations, and opportunities for governments to use digital tools for their enforcement efforts. It finds that governments have thus far mainly focused on digitalising their data collection and their exchange of information with the public and partners. Further application of digital tools can improve the connection of these tools and test predictive analytical tools such as artificial intelligence systems.
    Keywords: circular economy, digital technologies, Illegal Behaviour and the Enforcement of Law, resource efficiency
    JEL: L22 L23 O14 K42
    Date: 2024–04–26
  2. By: Daniel Auer; Michaela Slotwinski; Achim Ahrens; Dominik Hangartner; Selina Kurer; Stefanie Kurt; Alois Stutzer
    Abstract: Despite intense policy debates, the relationship between social welfare and refugee crime remains understudied. Taking steps to address this gap, our study focuses on Switzerland, where mobility restrictions on exogenously assigned refugees coincide with cantons’ autonomy in setting social assistance rates. Linking time-varying cantonal benefit rates between 2009 and 2016 to individual-level administrative data, we find that higher social assistance reduces criminal charges, especially for petty crimes and drug offenses. In light of limited (short-run) repercussions for refugees’ labor market participation, our results suggest social assistance can be a cost-effective measure to improve refugee welfare and enhance public safety.
    Keywords: immigration, crime, welfare benefits, refugees, migration policy
    JEL: D02 H53 J18 K42
    Date: 2024
  3. By: Budzinski, Oliver; Stöhr, Annika
    Abstract: In this paper, we comment on the debate about guidelines for Art. 102 TFEU in the face of the challenges brought by digital ecosystems and abuse of dominance in related markets. We take the perspective of dynamic competition economics and derive four recommendations for the future enforcement of abuse control and related merger control: (i) we advocate to abandon the as-efficient-competitor standard embraced in the late 2000s, (ii) we emphasize the relevance on focusing on exploitative abuses as well as on exclusionary ones, (iii) we suggest to implement a concept of systemic market power as a guideline to enforcement, and (iv) we argue that the same enhanced market power standard should also be applied in the corresponding merger control. While going beyond pure guideline recommendations and focusing on a dynamic-economic view, we are convinced that these steps are necessary to move towards a more effective competition policy towards abuse of digital dominance.
    Keywords: abuse of market power, Art. 102 TFEU, digital ecosystems, antitrust, European competition policy, as-efficient-competitor standard, exclusionary abuse, exploitative abuse, dynamic competition, merger control
    JEL: K21 L41 L40 L12 L14 L81 L86
    Date: 2024
  4. By: Stansbury, Anna (MIT)
    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.
    Keywords: minimum wage, labor standards, compliance and enforcement, industrial relations
    JEL: J38 J58 K31
    Date: 2024–03
  5. By: Claudio Deiana; Ludovica Giua; Roberto Nisticò
    Abstract: This paper establishes a new fact about immigration policies: legalization has long-term effects on formal employment of undocumented immigrants and their assimilation. We exploit the broad amnesty enacted in Italy in 2002 together with rich survey data collected in 2011 on a representative sample of immigrant households to estimate the effect of regularization in the long run. Immigrants who were not eligible for the amnesty have a 14% lower probability of working in the formal sector a decade later, are subject to more severe ethnic segregation on the job and display less linguistic assimilation than their regularized counterparts.
    Keywords: undocumented immigrants, amnesty program, formal employment, discrimination, segregation
    JEL: J15 J61 K37
    Date: 2024
  6. By: Madhav Goel (TrustBridge Rule of Law Foundation); Renuka Sane (TrustBridge Rule of Law Foundation)
    Abstract: This paper studies an instance of ambiguous drafting and the subsequent exercise of judicial discretion in the context of a Supreme Court decision in Vidarbha Industries Power Ltd. v. Axis Bank Ltd. The Bankruptcy Law Reforms Commission’s (BLRC) had clearly recommended that the judiciary not have any discretion on accepting an insolvency petition once the objective criteria for admitting it were met. The legislation, however, provided no rationale for why it chose to ignore the BLRC report and allow for the possibility of discretion, with the use of the word “may†, while adjudicating applications under Section 7 of the Insolvency and Bankruptcy Code (IBC). The Supreme Court used the phrase “may†to hold that the judiciary has the discretion to not admit applications under Section 7. The Court also did not provide tests for exercise of this discretion or for determination of insolvency. Since this decision, thirteen petitions under Section 7 have been dismissed. Litigation and delayed timelines caused as a result of this discretionary power will result in erosion of the economic value of the Corporate Debtor’s assets, and make financial creditors more wary of extending credit. The paper underscores the need to improve the quality of drafting and the importance of tempering judicial decisions with a practical understanding of commercial realities.
    Keywords: Drafting, Legislation
    JEL: K00
    Date: 2023–04
  7. By: Rafael Pucci
    Abstract: This paper investigates the understudied phenomenon of urban land conflicts in contexts with weak enforcement of property rights. I examine, both theoretically and empirically, the use of arson as a violent tool to force slum removal from high-value land in cities. Leveraging fine-grained geocoded data, I employ panel regression and Difference-in-Differences analyses to demonstrate that the probability of slum fires dramatically increases with rising land prices. This effect is nonlinear and driven exclusively by slums situated on private lands, highlighting the role of high-powered incentives behind arson. These results illustrate how urban land conflicts can have different outcomes than their rural counterparts.
    Keywords: Urban Land Conflict; Slums; Arson; Violence; Property Rights
    JEL: K42 D74 O18 R10
    Date: 2024–04–15
  8. By: Stöhr, Annika
    Abstract: This comprehensive review of ex-post merger studies assesses the price effects of horizontal transactions to determine whether there are common post-merger price effects, both overall and in specific markets. The aim is to derive implications for policy makers and competition authorities in terms of effective merger enforcement and competition policy. By combining and further analysing the results of 52 retrospective studies on 82 mergers or horizontal transactions, it can be shown that the sector in which the respective transaction takes place alone is not a strong indicator of the direction of price-related merger effects. In contrast, the "size" or "importance" of a transaction, as well as market concentration seem to be correlated with post-transaction price increases, especially in already highly concentrated markets. Overall, this meta-study shows the importance of ex-post case studies for improving ex-ante merger control: although generalisations can only be made with caution, the subsequent analysis of a case and its ex-post observable outcome can provide useful information for future merger enforcement in general, either in the same industry and/or with similar case characteristics, as well as for competition policy regulators.
    JEL: D49 K21 L13 L40
    Date: 2024
  9. By: Jaime Arellano-Bover; Marco De Simoni; Luigi Guiso; Rocco Macchiavello; Domenico J. Marchetti; Mounu Prem
    Abstract: Infiltration of the legal economy by criminal organizations (OCGs) is potentially significant, though how pervasive remains uncertain. Beyond the volume, the motives driving infiltration are of serious policy concern. We introduce a conceptual framework to differentiate between OCGs’ motives for infiltrating legal firms and validate it using new data from the Italian Financial Intelligence Unit. About 2% of Italian firms appear to have links with OCGs, with three primary motives. Firms established by OCGs are predominantly used for criminal activities (functional motive). Medium-sized firms, often infiltrated post-creation, primarily reflect a competitive motive, wherein criminal activities benefit the firm. Lastly, large, well-established firms remain separate from criminal activities and are used for pecuniary and non-pecuniary returns, such as to establish political connections (pure motive). This so far unnoticed motive accounts for a substantial share of OCGs’ infiltration.
    Keywords: organized crime, legal economy, firms, infiltration
    JEL: G30 L20 K40
    Date: 2024
  10. By: Ben Posmanick (St Bonaventure University); Alex Obie (St Bonaventure University); Bobby Chung (USF)
    Abstract: We study the substitution between licensed and unlicensed workers and the quality effect of employing licensed professionals on firms. Leveraging a quasi-licensure mandate of the Sarbanes-Oxley Act (SOX) on audit committees of publicly-traded firms, this paper studies the employment spillover and quality effects of licensing at the firm level. Assembling multiple data sources, we identify independent directors with relevant licenses and the quality of accounting reports for more than 5, 200 publicly-traded firms. Exploiting plausibly exogenous year-by-firm variation in fixed-effect models, the licensure mandate of SOX significantly increases the appointment of certified public accountants (CPAs) at the expense of other types of professionals at the board level. We find a precise zero effect for the presence of CPAs on audit committees on the need to refile financial statements.
    Keywords: Occupational Licensing, Employment Spillover, Quality, Sarbanes-Oxley
    JEL: J44 G38 K10
    Date: 2024–04
  11. By: Budzinski, Oliver
    Abstract: Financial regulation in sports is usually discussed in the context of representing an instrument against 'financial doping'. Notwithstanding the merits of this discussion, this paper takes the opposite perspective and analyses how market-internal financial regulation itself may anticompetitively influence sporting results. Virtually every regulative financial intervention distorts sporting competition to some extent and creates beneficiaries and losers. Sometimes, the actual winners and losers of financial regulation stand in line with the (legitimate) goals of the regulation like limiting financial imbalances or preventing distortive midseason insolvencies of teams. However, financial regulation may also display unintended side-effects like protecting hitherto successful teams from new challengers, cementing the competitive order, creating foreclosure and entry barriers, or serving vested interests of powerful parties. All of these effects may also be hidden agendas by those who are implementing and enforcing market-internal financial regulation or influencing it. This paper analyses various types of budget caps (including salary caps) with respect to potentially anticompetitive effects. UEFA's so-called Financial Fair Play Regulations and Formula One's recent budget cap are highlighted as examples. Furthermore, the paper discusses allocation schemes of common revenues (like from the collective sale of broadcasting rights) as another area of financial regulation with potentially anticompetitive effects. Eventually, the effects of standards for accounting, financial management, and auditing are discussed.
    Keywords: sports economics, financial regulation, budget caps, salary caps, financial fair play, financial doping, collective sale of media rights, sports broadcasting rights, revenue sharing, formula one
    JEL: Z20 Z23 L40 L83 K21
    Date: 2024
  12. By: Wojciech Hardy (University of Warsaw); Michał Krawczyk (University of Warsaw; Group for Research in Applied Economics (GRAPE); Group for Research in Applied Economics (GRAPE); University of Warsaw; Institute of Labor Economics (IZA))
    Abstract: The widespread Internet ``piracy'' continues to fuel the debate about business models impervious to copyright infringement. We studied the displacement effects of ``piracy'' on sales in the book industry. We conducted a year-long large-scale field experiment: in the treatment group, we removed unauthorized copies appearing on the Internet and observed the sales data, whereas in the control group, we simply observed sales. We were able to substantially curb the unauthorized distribution, which resulted in a small, positive effect on sales. While using classical analysis we found it not to be significantly different from zero, a Bayesian approach using previous ``piracy'' studies to generate a prior led to the conclusion that protecting from piracy resulted in a significant sales boost of about 9 percent.
    Keywords: digital piracy, copyright infringement, sales displacement, books, field experiment
    JEL: C93 D12 K42 L82 O34
    Date: 2023

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