Financial inclusion and legal system quality: are they correlated?

This study investigates the correlation between financial inclusion and legal system quality among developed countries from 2004 to 2012. The findings reveal a positive correlation between financial inclusion and legal system quality. The findings suggest that improvements in legal system quality goes hand in hand with improvements in the level of financial inclusion. More specifically, higher supply of ATM per 100,000 adults is correlated with stronger insolvency resolution framework among G7, European and non-European countries. Also, the number of bank branch per 100,000 adults is positively correlated with strong rule of law and legal rights in non-European countries. Also, the number of..

Law and Economics

Behavioural insight and regulatory governance: Opportunities and challenges

Governments are created and run by humans, who can experience the same behavioural biases and barriers as individuals in society. Therefore, it makes sense to explore how behavioural insights (BI) can be applied to the governance of regulatory policy making, and not just to the design of regulations themselves. Applying BI can help improve the efficiency and effectiveness of the decision-making process, which can, in turn, help improve regulatory decisions. This paper maps the ways in which barriers and biases can affect the institutions, processes and tools of regulatory governance, with a focus on regulatory oversight bodies and regulatory management tools. It concludes with practical ways..

Law and Economics

Crime as Conditional Rule Violation

Most of the time most individuals do not commit crime. Why? One explanation is deonto-logical. People abide by legal rules just because these are the rules. In this perspective, the power of normativity is critical. It is supported by experimental evidence. To an im-pressive degree, participants even abide by arbitrary, costly rules, in the complete absence of enforcement. Yet do they also do that if they learn that some of their peers violate the rule? The experiment shows that rule following is conditional on social information. The more peers violate the rule, the more participants are likely to do so as well, and the more severely the violation. This main finding replicates in a vignette..

Law and Economics

A Hard Look at “Soft” Cost‐control Measures in Healthcare Organizations: Evidence from Preferred Drug Policies in Germany

Cost‐control interventions that target physicians’ clinical discretion are common in healthcare, but evidence on their efficacy is scarce; in particular for “soft” policies when liability is unlikely to be enforced by the regulator. We study the effectiveness of preferred drug policies (minimum prescription quotas of specific “preferred” drugs) in altering physicians practice styles within the high volume drug class of HMG‐CoA‐reductase inhibitors (statins) in the German statutory health insurance system. Using a nationally representative panel of ambulatory care physicians between 2011 and 2014, we exploit the decentralized institutional setting to estimate physician respons..

Law and Economics

Frustration, Euphoria, and Violent Crime

We exploit a series of natural experiments that use real crime data to investigate the effect of a violation of expectancies on violent crime. We study two types of violation of expectancies that generate the emotions of frustration and euphoria. Our empirical designs exploit differential expectations (as measured by the odds of soccer games in the betting market) while maintaining the outcome unchanged (a loss in a soccer game for frustration, a win in a soccer game for euphoria). We find that frustration is followed by a spike in violent crime whereas euphoria is followed by a reduction in violent crime. The two effects are concentrated in a narrow time window after the end of the game: on..

Law and Economics

Data-driven mergers and personalization

This paper studies tech mergers that involve a large volume of consumer data. The merger links the markets for data collection and data application through a consumption synergy. The merger-specific efficiency gains exist in the market for data application due to the consumption synergy and data-enabled personalization. Prices fall in the market for data collection due to the merged firm's incentives to expand its outreach in the market for data application. But in the market for data application, prices generally rise as the efficiency gains are extracted away through personalized pricing, rather than being passed on to consumers. When the consumption synergy is large enough, the merger can..

Law and Economics

The Impact of Common Law on the Volume of Legal Services: An International Study

We show that the heavy use of legal services relative to output in the US is not a peculiarity of the country but applies to common law countries in general. It stems largely from better ability to contract and easier access to justice. Yet in close association, common law also opens significantly more room for rentseeking by lawyers than civil law. Thereby the costs could outweigh the benefits. Both real GDP per capita and openness emerge as further factors making room for lawyers.

Law and Economics

Managing Refugee Protection Crises: Policy Lessons from Economics and Political Science

We review and interpret research on the economic and political effects of receiving asylum seekers and refugees in developed countries, with a particular focus on the 2015 European refugee protection crisis and its aftermath. In the first part of the paper, we examine the consequences of receiving asylum seekers and refugees and identify two main findings. First, the reception of refugees is unlikely to generate large direct economic effects. Both labor market and fiscal consequences for host countries are likely to be relatively modest. Second, however, the broader political processes accompanying the reception and integration of refugees may give rise to indirect yet larger economic effect..

Law and Economics

TRAP'd Teens: Impacts of Abortion Provider Regulations on Fertility & Education

Targeted regulations of abortion providers (TRAP laws) are the fastest growing abortion restriction in the U.S. These often result in clinic closures, limiting abortion access. We study how women's exposure to these laws in adolescence affects their fertility and educational attainment. For this study, we codify the legal history of all TRAP laws ever implemented. We explore the impacts of TRAP laws on teen births using an event-study analysis and stacked differences-in-differences methodology to avoid issues of negative weighting inherent in two-way fixed effects approaches. Consistent with other evidence on abortion access, we find that impacts on births are large and robust for Black wome..

Law and Economics

Asylum Recognition Rates in Europe: Persecution, Policies and Performance

A minority of applicants for asylum in Europe gain some form of recognition as refugees, and this has been a controversial issue. From the early 2000s the EU introduced a series of directives to prevent a race to the bottom in asylum policies and to harmonise policy between destination countries but the results have not been fully assessed. In this paper I examine the determinants of recognition rates for asylum applicants from 65 origin countries to 20 European destinations from 2003 to 2017. The outcomes of the EU directives have been mixed, but taken together they are associated with increased recognition rates. These made a modest contribution to the trend increase in recognition rates m..

Law and Economics

Towards net zero carbon emissions: carbon pricing strategies and the role of innovative technologies

The 2021 COP 26 Summit held in Glasgow, has resulted, not only in groundbreaking agreements, but also the involvement of private sector investment, the participation of formidable alliances such as the Global Energy Alliance – and for the first time, the engagement of indigenous communities. Whilst ongoing negotiations and outcomes from the Summit appear promising, there are still concerns in relation to the lack of enforceability of agreements. This paper, not only aims to highlight the rationales underlying such concerns, but also consider the merits and applicability of innovative techniques and technologies – as well as notable progress and developments made during the ongoing Summit..

Law and Economics

Information Leakage, Imitation, and the Patent System

From a firm’s perspective two competing forces are driving the decision to invest in innovation. On the one hand, innovative performance is an important driver of profitability and growth. On the other hand, investments in innovation suffer from negative externalities, i.e. spillovers to other firms, and hence imitation could be induced. To preempt imitation firms may protect their inventions by means of intellectual property rights, such as patents. By taking out a patent, however, a firm also conveys information about the functioning of the invention to competitors. In this empirical paper, we highlight the trade-off of patenting by setting up a recursive system of equations on knowledge..

Law and Economics

Ways of taxing wealth: alternatives and interactions

In this paper, I examine the role of a wealth tax in the context of the UK's existing taxes on wealth. First, I discuss several ways in which the UK could be said to tax wealth already, and I set out two possible directions for reforming these taxes, highlighting policies that are merited under either approach. Second, I consider whether and under what circumstances a broad-based tax on the ownership of wealth – a ‘wealth tax’ – could be justified instead of or in addition to these reforms. Third, I address how a wealth tax should interact with other taxes, focusing on concerns regarding ‘double taxation’ and (conversely) proposals for an alternative minimum tax based on wealth. ..

Law and Economics

The future of the Central Bank and its autonomy in the Chilean Constitutional Convention

Regarding the discussion on a New Constitution in Chile, the debate on the autonomy of the Central Bank has polarized: Some consider it fundamental for macroeconomic balances, and others question it as an "authoritarian enclave". Should the Constitution settle this issue? It will be seen that it is not so much what it says on paper that matters, but how the autonomy and independence of the Central Bank are articulated in the reality.

Law and Economics

Stay at Home if You Can: COVID-19 Stay-at-Home Guidelines and Local Crime

Government responses to the COVID-19 pandemic had an unprecedented impact on mobility patterns with implications for public safety and crime dynamics in countries across the planet. This paper explores the effect of stay-at-home guidelines on thefts and robberies at the neighborhood level in a Latin American city. We exploit neighborhood heterogeneity in the ability of working adults to comply with stay-at-home recommendations and use difference-in differences and event study designs to identify the causal effect of COVID-19 mobility restrictions on the monthly number of thefts and robberies reported to police across neighborhoods in Montevideo (Uruguay) in 2020. Our results show that neighb..

Law and Economics

Why do Sovereign Borrowers Post Collateral? Evidence from the 19th Century

This paper explores the reasons why sovereign borrowers post collateral. Such behavior is paradoxical because conventional interpretations of collateral stress repossession of the assets pledged as the key to securing lenders against information asymmetries and moral hazard. However, repossession is generally difficult in the case of sovereign debt and in some cases impossible. Nevertheless, such sovereign `hypothecations` have a long history and are again becoming very popular today in developing countries. To explain sovereign collateralization, we emphasize an informational channel. Posting collateral produces information on opaque borrowers by displaying borrowers` behavior and resources..

Law and Economics

Does institutional quality mitigate the effect of Foreign Direct Investment on environmental quality: Evidence of MENA countries

The purpose of this study is to examine the interaction effects of Foreign Direct investment and institutional quality on environmental degradation in 17 Middle East and North African (MENA). We use ordinary least squares (OLS), Fixed effects (FE) random effects (RE) and system generalized method of moments (GMM) for the period 1996–2018. Six dimensions of governance are used : control of corruption, a sound voice and accountability, rule of Law, regulatory Quality, Govenance effectiviness and Political Stability. First, our findings show that FDI increases CO2 emissions in the MENA countries. Second, the effect of FDI on environmental degradation can be ameliorated through the presence of..

Law and Economics

Efficient copyright filters for online hosting platforms

In this paper, we build a theoretical model in which an online hosting platform can develop a copyright filter to screen content that contributors wish to upload. The technology is imprecise, since non-infringing material may be incorrectly filtered out. Once the content is hosted on the platform, a right-holder may send a take-down notice if its own automated notice system, also imprecise, finds it to be copyright infringing. We investigate the efficient design of regulation and liability and we find that (i) the right-holder should be given incentives to evaluate fair use when submitting a notice and (ii) the platform should be fined if the take-down to notice ratio is above some predeterm..

Law and Economics

The Causal Impact of Taking Parental Leave on Wages: Evidence from 2005 to 2015

Within the context of Luxembourg, we analyze the causal effect of parental leave take up on post-birth hourly wages of an important subpopulation of parental-leave-eligible mothers, i.e., first-time mothers that are always employed regardless of having taken parental leave. In our analysis, we simultaneously address selection of eligible mothers in taking parental leave, and selection of eligible mothers into employment. To deal with the first complication, we assume that conditional on observed pre-intervention covariates there are no unobserved factors associated to both the assignment to parental leave and the potential post-birth hourly wages. To this end, we control for a rich set of pr..

Law and Economics

It's a man's world: culture of abuse, #MeToo and worker flows

Sexual harassment and sexists behaviors are pervasive issues in the workplace. Around 12% of women in France have been subjected to toxic behaviors at work in the last year, including sexist comments, moral, sexual or physical harassment, or violence. Such toxic behaviors can not only deter women from entering the labor market, but can also lead them to leave toxic workplaces at their own expense. This article is one of the first to examine the relationship between toxic behaviors and worker flows. We use the #MeToo movement as an exogenous shock to France's workplace norms regarding toxic behaviors. We combine survey data on reported toxic behaviors in firms with exhaustive administrative d..

Law and Economics

It's a man's world: culture of abuse, #MeToo and worker flows

Sexual harassment and sexists behaviors are pervasive issues in the workplace. Around 12% of women in France have been subjected to toxic behaviors at work in the last year, including sexist comments, moral, sexual or physical harassment, or violence. Such toxic behaviors can not only deter women from entering the labor market, but can also lead them to leave toxic workplaces at their own expense. This article is one of the first to examine the relationship between toxic behaviors and worker flows. We use the #MeToo movement as an exogenous shock to France's workplace norms regarding toxic behaviors. We combine survey data on reported toxic behaviors in firms with exhaustive administrative d..

Law and Economics

Effects of COVID-19 Shutdowns on Domestic Violence in US Cities

We empirically investigate the impact of COVID-19 shutdowns on domestic violence using incident-level data on both domestic-related calls for service and crime reports of domestic violence assaults from the 18 major US police departments for which both types of records are available. Although we confirm prior reports of an increase in domestic calls for service at the start of the pandemic, we find that the increase preceded mandatory shutdowns, and there was an incremental decline following the government imposition of restrictions. We find no evidence that domestic violence crimes increased. Rather, domestic violence assaults declined significantly during the initial shutdown period and th..

Law and Economics

Getting Off on the Wrong Foot: The Long-Term Effects of Missing a Large-Scale Amnesty for Immigrant Workers

We estimate the long-run effects of ineligibility for legalization on immigrants' formal employment and assimilation at work. Our empirical approach exploits the exogenous change in probability of obtaining legal status induced by a 2002 Italian amnesty program targeting irregular foreign workers. We show that immigrants unexposed to the amnesty have a 15% lower probability of being regularly employed a decade later than their counterparts. They also experience a deterioration in their working conditions in the long run, with increases in job immobility and segregation, and a decline in linguistic assimilation.

Law and Economics

Sex workers’ everyday security in the Netherlands and the impact of COVID-19

The COVID-19 pandemic has laid bare and exacerbates the existing insecurities of sex workers, a highly stigmatised, often criminalised and economically precarious group of workers. In the Netherlands, sex workers continue to experience different forms of violence despite the occupation’s legalisation, making it a ‘profession in limbo’. This paper therefore seeks to formulate answers to the questions: What are sex workers’ everyday experiences of (in)security? And: How has the COVID-19 pandemic influenced these? Given sex workers’ historical exclusion from policy formulation, we engage with these questions through collaborative research based on semi-structured interviews with sex w..

Law and Economics

Right to Research and Copyright Law: From Photocopying to Shadow Libraries

Academic research and publishing are facing a crisis. The importance of access to academic literature in an interconnected world, the ever-growing cost of subscriptions to this literature, different revenue models of journals, and reducing or stagnant library budgets are pushing research and the academic community to find alternatives for academic research and publications. In its 25 years of existence, the open access movement and models which sought to contain the crisis have become the subject of considerable criticism. At the same time, a significant portion of academic literature remains locked behind steep paywalls. This has led to the growth of pirate websites and shadow libraries whi..

Law and Economics

What we pay in the shadow: Labor tax evasion, minimum wage hike and employment

The interactions between minimum wage policy and tax evasion remain largely unknown. We study firm-level employment effects of a large and biting minimum wage increase in Latvia conditional on labor tax compliance. The Latvian labor market is characterized by the prevalence of envelope wages, i.e. unreported cash-in-hand complements to the official wage. We apply machine learning to classify firms between compliant and tax-evading using a unique combination of administrative and survey data. We then show that firms engaged in labor tax evasion are insensitive to the minimum wage shock. Our results suggest that these firms use wage underreporting as an adjustment margin, converting (part of) ..

Law and Economics

The Impact of Immigration on Workers’ Protection

Even though the existing literature investigating the labor market impact of immigration assumes, implicitly or explicitly, that labor market regulation is exogenous to immigration (in terms of both size and composition), this is not necessarily the case. This paper shows that labor market regulation responds to the composition of the immigrant population. We build a novel workers’ protection index based on 36 labor law variables over a sample of 70 developed and developing countries from 1970 to 2010. Exploiting a dynamic panel setting using both internal and external instruments, we find that workers’ protection in destination countries is influenced by the degree of workers’ protect..

Law and Economics

Merger Review Regimes in the ASEAN Region and Case Analysis of Grab-Uber Merger

In 2018, the largest yet cross-border M&A deal between digital platforms in Southeast Asia was reached, namely the Grab-Uber M&A case. The local digital platform Grab consolidated the regional operations of San Francisco, California-based Uber, a development which had significant effects on competition and consumer welfares in the Southeast Asia digital market. The competition authorities in the region independently initiated their investigation and started to deliberate the merger case to determine the anti-competitive effects on their domestic market, and to decide whether this transaction should be restricted or approved. Even though the two merging and merged firms completed their transa..

Law and Economics

A time to throw stones, a time to reap: How long does it take for democratic transitions to improve institutional outcomes?

We study the impact of democratic transitions on institutional outcomes. Using an event study method and a sample of 135 countries over the period 1984-2016, we observe that democratic transitions improve institutional outcomes. The effect appears within 3 years after the transition year. The results are robust to alternative definitions of transitions, alternative codings of pre- A nd post-transition years, and changing the set of control variables. We also find that both full and partial democratizations improve institutional outcomes. Transitions out of military regimes or communist autocracies do not. The effect of democratization depends on GDP per capita, education, and the regularity ..

Law and Economics

Broken windows policing and crime: Evidence from 80 Colombian cities

Law and Economics