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on Law and Economics |
| By: | Siddhartha Bandyopadhyay; Bryan C McCannon |
| Abstract: | We examine how retention motives affect prosecutor behaviour under different evaluation criteria. In particular, we analyze how prosecutors of differing capabilities respond in choosing which cases to take to trail and which to plea bargain. We show how different criteria distort the mix of cases chosen for trail and that the direction of the distortion depends crucially on the evaluation tool used. Optimal evaluation metrics are derived that combine multiple signals of performance and are shown to achieve the first-best outcome. |
| Keywords: | plea bargaining, prosecutor evaluation, retention, signaling |
| JEL: | K41 D82 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:bir:birmec:10-11&r=law |
| By: | Yamamura, Eiji |
| Abstract: | Using Japanese panel data for 2006-2009, this study attempts to examine how the pass rate of law school student taking the new bar examination influences the number of applicants for the law school in the following years. The major finding is that the higher the law school student pass rate, the greater the number of applicants for the law school becomes. Furthermore, the positive effect of the pass rate is larger for a prestigious university’s law school than for other schools. It follows that the “brand” and the school’s current performance are complementary in increasing demand for places in the law school. |
| Keywords: | brand; law school; Japan; demand |
| JEL: | K40 A23 |
| Date: | 2010–04–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:22036&r=law |
| By: | Chen, Yongmin; Hua, Xinyu |
| Abstract: | Low-quality products may cause consumer harm. A firm can reduce the probability of low quality through ex ante investment before sales, and can take remedy actions such as product recalls if it learns after sales that product quality is low. An increase in the firm's product liability increases its incentive for ex post remedy; more ex post remedy, however, may reduce the firm's ex ante quality investment. On the other hand, higher product liability increases consumer demand for the product, resulting in high output and hence greater return to ex ante investment. The trade-off between these two effects, the "substitution effect" and the "output effect", can lead to an inverted U-shaped relationship between ex ante investment and product liability. We find that the firm always prefers full liability whereas consumers might be better off with less than full liability. Full product liability tends to be socially optimal when the potential consumer loss from low quality is sufficiently high; otherwise partial liability can be socially optimal. |
| Keywords: | Ex ante Investment; Product Recall; Liability |
| JEL: | K13 L15 |
| Date: | 2010–04–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:22031&r=law |
| By: | Ponce, Aldo |
| Abstract: | In this paper, I examine the effectiveness of improvements in political and civil rights for attracting foreign direct investment flows (FDI) into democracies. I contend that advances in the quality of democracy – specifically those concerning civil rights – present positive but decreasing marginal returns in attracting FDI inflows. I empirically prove this proposition by using panel data regressions within the Latin American and Eastern European contexts from periods following their democratization (1991-2003). |
| Keywords: | foreign direct investment; civil rights; democratization; developing nations; Latin America; Eastern Europe |
| JEL: | K12 K00 F21 K11 K31 P52 |
| Date: | 2010–03–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:22020&r=law |
| By: | Ojo, Marianne |
| Abstract: | This paper consolidates the work of its predecessor, “International Framework for Liquidity Risk Measurement, Standards and Monitoring: Corporate Governance and Internal Controls”, by considering monitoring tools which are considered to be essential if risks,(and in particular liquidity risks which are attributed to a bank), are to be managed and measured effectively by its management. It also considers developments which have triggered the need for particular monitoring tools – not only in relation to liquidity risks, but also to the rise of conglomerates and consolidated undertakings. It highlights weaknesses in financial supervision – weaknesses which were revealed following the collapses of Barings and Lehman Brothers. As well as attempting to draw comparisons between the recommendations which were made by the Board of Banking Supervision (BoBS) following Barings’ collapse, and the application issues raised by the Basel Committee in its 2009 Consultative Document, International Framework for Liquidity Risk Measurement, Standards and Monitoring, it highlights the links and relevance between both recommendations. In drawing attention to the significance of corporate governance, audit committees, and supervisory boards, the importance of effective communication between management at all levels, to ensure transmission and communication of timely, accurate and complete information, is also highlighted. Through a comparative analysis of two contrasting corporate governance systems, namely, Germany and the UK, it analyses and evaluates how the design of corporate governance systems could influence transparency, disclosure, as well as higher levels of monitoring and accountability. Whilst highlighting the need for, and the growing importance of formal risk assessment models, the paper also emphasises the dangers inherent in formalism – as illustrated by a rules based approach to regulation. It will however, demonstrate that detailed rules could still operate within a system of principles based regulation – whilst enabling a consideration of the substance of the transactions which are involved. In addressing the issues raised by principles based regulation, the extent to which such issues can be resolved, to a large extent, depends on adequate compliance with Basel Core Principle 17 (for effective banking supervision) – and particularly on the implementation, design and compliance with “clear arrangements for delegating authority and responsibility.” |
| Keywords: | liquidity; principles based regulation; risks; corporate governance; audit; creative compliance |
| JEL: | K2 G3 M42 G21 |
| Date: | 2010–04–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:22125&r=law |
| By: | Bin Dong (QUT); Benno Torgler (QUT) |
| Abstract: | With complementary Chinese data sets and alternative corruption measures, we explore the consequences of corruption. Adopting a novel approach we provide evidence that corruption can have both, positive and negative effects, on economic development. The overall impact of corruption might be the balance of the two simultaneous effects within a specific institutional environment (“grease the wheels†and “sand the wheelsâ€). Corruption is observed to considerably increase income inequality in China. We also find that corruption strongly reduces tax revenue. Looking at things from an expenditure point of view we observe that corruption significantly decreases government spending on education, R&D and public health in China. We also observe that regional corruption significantly reduces inbound foreign direct investment in Chinese regions, which indicates that the pollution haven hypothesis may not hold in China. This finding sheds a new light on the “China puzzle†that China is the largest developing host of FDI while it is appears to be very corrupt. Finally we observe that corruption substantially aggravates pollution probably through loosening environment regulation, and that it modifies the effects of trade openness and FDI on the stringency of environmental policy in a manner opposite to that observed in literature to date. |
| Keywords: | Corruption; China; Government; Economic Development; Inequality; |
| JEL: | D72 H11 K42 |
| Date: | 2010–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:qut:dpaper:256&r=law |
| By: | Bin Dong (QUT); Benno Torgler (QUT) |
| Abstract: | In this study we explore in detail the causes of corruption in China using two different sets of data at the regional level (provinces and cities). We observe that regions with more anti-corruption efforts, histories of British rule, higher openness, more access to media and relatively higher wages of government employees are markedly less corrupt; while social heterogeneity, regulation, abundance of resource and state-owned enterprises substantially breed regional corruption. Moreover, fiscal decentralization is discovered to depress corruption significantly, while administrative decentralization fosters local corruption. We also find that there is currently a positive relationship between corruption and economic development in China that is mainly driven by the transition to a market economy. |
| Keywords: | Corruption; China; Government; Decentralization; Deterrence; Social Heterogenity |
| JEL: | D73 H11 K42 |
| Date: | 2010–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:qut:dpaper:257&r=law |