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on Law and Economics |
| By: | Patacchini, Eleonora; Zenou, Yves |
| Abstract: | This paper studies the relationship between a community's ethnic population density and its crime rate. We compare the spatial distribution of crime and the black population across the 32 London boroughs. Once endogeneity and sorting issues are taken into account, we find that the higher is the density of the ethnic population in a given borough, the higher is the crime rate. This effect is still positive but lower for neighbouring boroughs and ceases to exist beyond a 40 minute driving distance. Social interactions between individuals of the same ethnic group are the most likely explanation for this positive relationship. |
| Keywords: | Crime; Ethnic minorities; Panel data; Social interactions; Spatial correlation |
| JEL: | C21 K42 R12 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6840&r=law |
| By: | Emilie Dargaud (GATE, University of Lyon, CNRS, ENS-LSH, Centre Léon Bérard, France) |
| Abstract: | In this paper, we study the impact of a merger on collusion depending on the endowment of capital asset among firms. We show that the merger makes the collusion easier to sustain when asymmetric capital stock combines with less efficient insiders because of more symmetric conditions and closer incentive constraints. Moreover, this model allows us to determine an optimal threshold of asymmetry among insiders and outsiders such as a merger has pro-competitive effects and we compare this value with the value which would restore perfect symmetry between firms after the merger. |
| Keywords: | leniency programs, merger, oligopoly supergame |
| JEL: | K42 L11 L41 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:0814&r=law |
| By: | Jahn, Elke J. (Department of Economics, Aarhus School of Business); Wagner, Thomas (University of Applied Sciences) |
| Abstract: | This paper develops a hedonic model of job security (JS). Workers with heterogeneous JS-preferences pay the hedonic price for JS to employers, who incur labor-hoarding costs from supplying JS. In contrast to the Wage-Bill Argument, equilibrium unemployment is strictly positive, as workers with weak JS-preferences trade JS for higher wages. The relation between optimal job insecurity and the perceived dismissal probability is hump-shaped. If firms observe demand, but workers do not, separation is not contractible and firms dismiss workers at-will. Although the workers are risk-averse, they respond to the one-sided private information by trading wage-risk for a higher JS. With two-sided private information, even JS-neutral workers pay the price for a JS guarantee, if their risk premium associated with the wage-replacement risk is larger than the social net loss from production. |
| Keywords: | job security; hedonic market; implicit contract theory; guaranteed employment contract; severance pay contract; asymmetric information; prudence |
| JEL: | D86 J41 J65 K31 |
| Date: | 2008–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:aareco:2008_006&r=law |
| By: | Patricia M. Danzon; Andrew J. Epstein |
| Abstract: | This study examines the effect of price regulation and competition on launch timing and pricing of new drugs. Our data cover launch experience in 15 countries for drugs in 12 therapeutic classes that experienced significant innovation over the decade 1992-2003. We use prices of established products as a measure of the direct effect of a country's own regulatory system, and find that launch timing and prices of innovative drugs are influenced by prices of established products. Thus, if price regulation reduces drug prices, it contributes to launch delay in the home country. New drug launch hazards and launch prices in low-price countries are also affected by referencing by other, high-price countries, especially within the EU, as expected if manufacturers delay launch in low-price markets to avoid undermining higher prices in other countries. Thus, referencing policies adopted in high-price countries can impose welfare loss on low-price countries. Prices of new drugs are influenced mainly by prices of other drugs within the same subclass; however, dynamic competition from new subclasses undermines new drug launch in older subclasses. Association with a local firm accelerates launch only in certain regulated markets. These findings have implications for US proposals to constrain pharmaceutical prices in the US through external referencing and drug importation. |
| JEL: | I11 I18 K2 L5 L65 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14041&r=law |
| By: | Santella, Paolo; Baffi, Enrico; Drago, Carlo; Lattuca, Dino |
| Abstract: | Starting from the observation that at the multilateral level shareholder activism is considered as an important aspect of good corporate governance, this paper examines several legal and economic obstacles to institutional investor activism in the EU and in the US. We also examine the voting record of 76 institutional investors in the US and of several others in the EU. We find that US investors seem to have easier access to proxy voting than in the EU (although recent EU legislation should remove several of the present legal obstacles); that conflicts of interest seem to limit the activism of several categories of institutional investors both in the US and in the EU; that some national legislations limit the ability of institutional investors to coordinate their voting policies; and that recourse to stock lending and other forms of separation of financial risk from voting rights seems to be practiced more by controlling shareholders at the expense of institutional investors than the opposite. We also find that institutional investors in the US seem to have a more adversarial voting pattern vis-à-vis company managements than in the UK; this might be due to the fewer voting rights given to shareholders by the US regulatory framework. As for Europe, institutional investors' voting pattern is by far the most adversarial in France, where there is a high incidence of control-enhancing mechanisms. Institutional investors seem to have an adversarial voting stance also in Greece, Belgium and Sweden, where control-enhancing mechanisms are also present, while in Italy they tend to have a low voting turnout. More in general, EU investors’ voting pattern seems to be sensitive to the presence of control-enhancing mechanisms, ownership concentration, and to the origin of the national legal system. |
| Keywords: | Shareholder activism; shareholder voting; proxy voting; acting in concert; securities lending; institutional investors; legal origins; control-enhancing mechanisms; corporate governance; ownership concentration |
| JEL: | K2 G2 G34 G3 G24 |
| Date: | 2008–05–26 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:8929&r=law |
| By: | Sebastian von Engelhardt (Friedrich Schiller University Jena, School of Economics and Business Administration) |
| Abstract: | Software is a good with very special economic characteristics. Taking a general deï¬nition of software as its starting-point, this article systematically elaborates the central qualities of the commodity which have implications for its production and cost structure, the demand, the contestability of software-markets, and the allocative efï¬ciency. In this context it appears to be reasonable to subsume the various characteristics under the following generic terms: software as a means of data-processing, software as a system of commands or instructions, software as a recombinant system, software as a good which can only be used in discrete units, software as a complex system, and software as an intangible good. Evidently, software is characterized by a considerable number of economically relevant qualities—ranging from network effects to a subadditive cost function to nonrivalry. Particularly to emphasise is the fact that software fundamentally differs from other information goods: First, from a consumer's perspective the readability and other aspects concerning how the information is presented, is irrelevant. Second, the average consumer/user is interested only in the funtionality of the algorithms but not in the underlying information. |
| Keywords: | digital goods, compatibility, information good, network effects, nonrivalry, open source, recombinability, software |
| JEL: | D82 D83 D62 D85 K11 L17 |
| Date: | 2008–06–04 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2008-045&r=law |