Abstract Civil liability and ex ante authorizations are usually combined to regulate risks from high-risk industries. Authorizations may require firms to be sufficiently endowed with assets. Such a requirement is made in order to force sufficient risk internalization by firms, thus ensuring optimal decisions on risk control. But most studies on the incentives provided by asset requirements for controlling risks have been conducted in a context of a unique technology of production. When the firm has the possibility of adopting new and more cost-efficient technology, we show that tightening the minimum asset requirement can have a non-monotonic effect on the firm’s technological choice: increasing the firm’s level of assets can lead to a divergence of private and social interests as regards the technological choice. This feature can be observed both when the level of harm is dependent on, or independent of, the level of activity.
{"title":"The (Mixed) Effects of Minimum Asset Requirements When There is a Possibility of Technological Change","authors":"Julien Jacob","doi":"10.1515/RLE-2018-0071","DOIUrl":"https://doi.org/10.1515/RLE-2018-0071","url":null,"abstract":"Abstract Civil liability and ex ante authorizations are usually combined to regulate risks from high-risk industries. Authorizations may require firms to be sufficiently endowed with assets. Such a requirement is made in order to force sufficient risk internalization by firms, thus ensuring optimal decisions on risk control. But most studies on the incentives provided by asset requirements for controlling risks have been conducted in a context of a unique technology of production. When the firm has the possibility of adopting new and more cost-efficient technology, we show that tightening the minimum asset requirement can have a non-monotonic effect on the firm’s technological choice: increasing the firm’s level of assets can lead to a divergence of private and social interests as regards the technological choice. This feature can be observed both when the level of harm is dependent on, or independent of, the level of activity.","PeriodicalId":44795,"journal":{"name":"Review of Law & Economics","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2020-09-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90582733","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract This paper studies the effect of constitutional commitment to social security (CCSS) on different categories of social expenditure. For this purpose, we use a pooled cross sectional database for 17 EU-countries from 1990 till 2012. We run OLS models, 2SLS regression models and the Heckman two step model, using the rigidity of the constitution as instrumental variable to correct for possible endogeneity. A positive effect of constitutional commitment to social security is found on total social expenditure and on all four categories of social security spending: old age and survivor, incapacity, unemployment and active labor market policies (ALMPs). The largest effect sizes, expressed as a percentage of average spending, are found for expenditure on unemployment and ALMPs. This shows that constitutional commitment to social security has the largest effect on social expenditure schemes targeted at people who are perceived as less deserving by the public opinion.
{"title":"The Effect of Constitutional Commitment to Social Security on Social Expenditure Schemes","authors":"E. Cammeraat","doi":"10.1515/RLE-2019-0051","DOIUrl":"https://doi.org/10.1515/RLE-2019-0051","url":null,"abstract":"Abstract This paper studies the effect of constitutional commitment to social security (CCSS) on different categories of social expenditure. For this purpose, we use a pooled cross sectional database for 17 EU-countries from 1990 till 2012. We run OLS models, 2SLS regression models and the Heckman two step model, using the rigidity of the constitution as instrumental variable to correct for possible endogeneity. A positive effect of constitutional commitment to social security is found on total social expenditure and on all four categories of social security spending: old age and survivor, incapacity, unemployment and active labor market policies (ALMPs). The largest effect sizes, expressed as a percentage of average spending, are found for expenditure on unemployment and ALMPs. This shows that constitutional commitment to social security has the largest effect on social expenditure schemes targeted at people who are perceived as less deserving by the public opinion.","PeriodicalId":44795,"journal":{"name":"Review of Law & Economics","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2020-09-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87859124","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Political Insulation, Technical Expertise and the Technocrat’s Paradox","authors":"Diego Pardow Lorenzo","doi":"10.1515/RLE-2016-0056","DOIUrl":"https://doi.org/10.1515/RLE-2016-0056","url":null,"abstract":"","PeriodicalId":44795,"journal":{"name":"Review of Law & Economics","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2020-03-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78018339","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The Coase theorem states that where there are externalities and no transaction costs resource allocation is Pareto-optimal and independent of the stakeholders’ legal position. This result has been challenged many times. In the cooperative game approach to resource allocation, the refutation is made by constructing a three-person game which has an empty core under one set of liability rules—which implies that optimal allocations are coalitionally unstable–and a nonempty core under another set. In this example, however, the probability that the core is non-empty is rather high (5/6). Yet, even if coalitionally stable Pareto-optimal arrangements are likely, to establish the plain validity of the Coase theorem it must be shown that the legal neutrality statement also holds. We show that for the three-person cooperative game example mentioned above, the probability that the two assertions of the Coase theorem hold can be as low as 3/8.
{"title":"The Coase Theorem, the Nonempty Core, and the Legal Neutrality Principle","authors":"Crettez Bertrand","doi":"10.1515/RLE-2018-0027","DOIUrl":"https://doi.org/10.1515/RLE-2018-0027","url":null,"abstract":"The Coase theorem states that where there are externalities and no transaction costs resource allocation is Pareto-optimal and independent of the stakeholders’ legal position. This result has been challenged many times. In the cooperative game approach to resource allocation, the refutation is made by constructing a three-person game which has an empty core under one set of liability rules—which implies that optimal allocations are coalitionally unstable–and a nonempty core under another set. In this example, however, the probability that the core is non-empty is rather high (5/6). Yet, even if coalitionally stable Pareto-optimal arrangements are likely, to establish the plain validity of the Coase theorem it must be shown that the legal neutrality statement also holds. We show that for the three-person cooperative game example mentioned above, the probability that the two assertions of the Coase theorem hold can be as low as 3/8.","PeriodicalId":44795,"journal":{"name":"Review of Law & Economics","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2020-03-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88023994","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract This paper analyzes the social effectiveness of fines (sanctions) and awards (liability) where accident risks are influenced by decisions made by both the enterprise and the employees of the enterprise (individuals). The regulator observes a proportion of accidents and the safety decision of the individual can be contractible or non-contractible for the enterprise. All sanction regimes yield the first best, given contractible individual care. The liability regimes, however, produce sub-optimal solutions. Given non-contractible individual care, the combined use of an individual sanction and an enterprise sanction (joint use) produces the first best. The exclusive use of an individual sanction produces the first best if the enterprise does not suffer any direct harm. The exclusive use of an enterprise sanction does not, however, produce the first best. If both decision-makers are solvent and have similar liability probabilities, then individual and enterprise liability do equally well under contractible individual care. Individual liability does, however, best for non-contractible individual care.
{"title":"Individual or Enterprise Liability? The Roles of Sanctions and Liability Under Contractible and Non-contractible Safety Efforts","authors":"S. Grepperud","doi":"10.1515/rle-2016-0068","DOIUrl":"https://doi.org/10.1515/rle-2016-0068","url":null,"abstract":"Abstract This paper analyzes the social effectiveness of fines (sanctions) and awards (liability) where accident risks are influenced by decisions made by both the enterprise and the employees of the enterprise (individuals). The regulator observes a proportion of accidents and the safety decision of the individual can be contractible or non-contractible for the enterprise. All sanction regimes yield the first best, given contractible individual care. The liability regimes, however, produce sub-optimal solutions. Given non-contractible individual care, the combined use of an individual sanction and an enterprise sanction (joint use) produces the first best. The exclusive use of an individual sanction produces the first best if the enterprise does not suffer any direct harm. The exclusive use of an enterprise sanction does not, however, produce the first best. If both decision-makers are solvent and have similar liability probabilities, then individual and enterprise liability do equally well under contractible individual care. Individual liability does, however, best for non-contractible individual care.","PeriodicalId":44795,"journal":{"name":"Review of Law & Economics","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2020-03-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78701263","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract When parties are risk-averse and therefore take out insurance, the efficiency of a tort rule depends on how well the insurance contracts govern incentives, risk allocation and transaction costs under the rule. This article presents two overlooked or discarded advantages of the rule of negligence over strict liability, which appear when insurance contracts are incomplete due to ex-ante transaction or ex-post verification costs. One advantage arises because of a legal impediment under strict liability: insurers cannot exempt coverage for all acts of simple negligence. Instead, the insurer must, at a cost, precisely specify each act for which coverage is excluded. Such specification can be prohibitively costly when there are many acts and many contingencies. These transaction costs, or the inefficient risk allocation associated with a deductible, are avoided under the negligence rule, where under idealized conditions the injurer can simply take due care and need not take out insurance. The other advantage of the negligence rule is that it provides incentives for the victim to bring forward information about the injurer’s acts. The victim has little incentive to convey such information under strict liability, whereas the victim’s insurer may elicit it, e. g. by not covering the victim’s loss fully.
{"title":"Two Advantages of the Negligence Rule Over Strict Liability when the Parties are Risk Averse","authors":"Henrik Lando","doi":"10.1515/rle-2018-0070","DOIUrl":"https://doi.org/10.1515/rle-2018-0070","url":null,"abstract":"Abstract When parties are risk-averse and therefore take out insurance, the efficiency of a tort rule depends on how well the insurance contracts govern incentives, risk allocation and transaction costs under the rule. This article presents two overlooked or discarded advantages of the rule of negligence over strict liability, which appear when insurance contracts are incomplete due to ex-ante transaction or ex-post verification costs. One advantage arises because of a legal impediment under strict liability: insurers cannot exempt coverage for all acts of simple negligence. Instead, the insurer must, at a cost, precisely specify each act for which coverage is excluded. Such specification can be prohibitively costly when there are many acts and many contingencies. These transaction costs, or the inefficient risk allocation associated with a deductible, are avoided under the negligence rule, where under idealized conditions the injurer can simply take due care and need not take out insurance. The other advantage of the negligence rule is that it provides incentives for the victim to bring forward information about the injurer’s acts. The victim has little incentive to convey such information under strict liability, whereas the victim’s insurer may elicit it, e. g. by not covering the victim’s loss fully.","PeriodicalId":44795,"journal":{"name":"Review of Law & Economics","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2020-03-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82991084","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract The European Association of Law and Economics grants a biennial Lifetime Achievement Award and Honorary Membership to a scholar “for his or her significant contributions to the field of Law and Economics, in particular to the development of this scientific movement in Europe.” This paper is the award lecture delivered by Professor Francesco Parisi at the Annual Meeting of the European Association of Law and Economics, held at Tel-Aviv University on September, 19, 2019.
欧洲法律与经济学协会(European Association of Law and Economics)每两年颁发一次终身成就奖和荣誉会员，以表彰“对法律与经济学领域，特别是对欧洲这一科学运动的发展做出重大贡献”的学者。本文为2019年9月19日在特拉维夫大学举行的欧洲法律与经济协会年会上Francesco Parisi教授的获奖演讲。
{"title":"Law and Economics as We Grow Younger","authors":"F. Parisi","doi":"10.1515/rle-2020-0009","DOIUrl":"https://doi.org/10.1515/rle-2020-0009","url":null,"abstract":"Abstract The European Association of Law and Economics grants a biennial Lifetime Achievement Award and Honorary Membership to a scholar “for his or her significant contributions to the field of Law and Economics, in particular to the development of this scientific movement in Europe.” This paper is the award lecture delivered by Professor Francesco Parisi at the Annual Meeting of the European Association of Law and Economics, held at Tel-Aviv University on September, 19, 2019.","PeriodicalId":44795,"journal":{"name":"Review of Law & Economics","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2020-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73972050","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The European Association of Law and Economics (EALE) asked me to write a Laudatio. It is a great pleasure and honor to introduce Professor Francesco Parisi for the 2019 EALE Lifetime Achievement Award and Honorary Membership to the European Association of Law and Economics. Beginning in 2019, the recipient of the award will deliver the EALE Award lecture the year after the announcement of the prize. In the Award lecture, which will be published following these remarks in the Review of Law and Economics, Professor Parisi gave us a charming narrative of how he came to discover law and economics, and the important encounters in his life that brought him to where he is in the field of law and economics. I have known Professor Parisi for many years, and in this Laudatio, I shall take the liberty to refer to him as Francesco. Several factors contributed to his achievement of becoming one of the most influential writers in our discipline, including his dedication, tenacity, intelligence and sharpmindedness. For many years, Francesco studied law at the University of Rome and later at Berkeley School of Law. He is a lawyer through and through, possessing comprehensive knowledge and a subtle understanding of concepts and systems in law. He does not make readers believe that law is a sub-field or an appendix of economics, or as one prominent scholar – my friend Robert Cooter, who will forgive me for referring to him in this context – once suggested, that torts, contracts and property form a unity, are all the same, and have no life of their own. Also, in my view, it is important that Francesco received his first academic training in Italy, a country with a rich tradition of institutional thinking and scholarship, and a country that has produced some of the most important contemporary research results for institutional economics. This tradition has always been kept alive in Italy and was not crowded out by neoclassical economics, which disregarded the economic importance of institutions. Francesco made early contacts with the civil law scholar Pietro Trimarchi from Milan, who in the late 1960s and early ‘70s, single-handedly and independently, published a series of foundational papers, which contain essential insights for our discipline. The pioneering Guido Calabresi, who has an Italian background too, once told me that he has the highest regards for Trimarchi’s
{"title":"Laudatio: Francesco Parisi","authors":"H. Schaefer","doi":"10.1515/rle-2020-2057","DOIUrl":"https://doi.org/10.1515/rle-2020-2057","url":null,"abstract":"The European Association of Law and Economics (EALE) asked me to write a Laudatio. It is a great pleasure and honor to introduce Professor Francesco Parisi for the 2019 EALE Lifetime Achievement Award and Honorary Membership to the European Association of Law and Economics. Beginning in 2019, the recipient of the award will deliver the EALE Award lecture the year after the announcement of the prize. In the Award lecture, which will be published following these remarks in the Review of Law and Economics, Professor Parisi gave us a charming narrative of how he came to discover law and economics, and the important encounters in his life that brought him to where he is in the field of law and economics. I have known Professor Parisi for many years, and in this Laudatio, I shall take the liberty to refer to him as Francesco. Several factors contributed to his achievement of becoming one of the most influential writers in our discipline, including his dedication, tenacity, intelligence and sharpmindedness. For many years, Francesco studied law at the University of Rome and later at Berkeley School of Law. He is a lawyer through and through, possessing comprehensive knowledge and a subtle understanding of concepts and systems in law. He does not make readers believe that law is a sub-field or an appendix of economics, or as one prominent scholar – my friend Robert Cooter, who will forgive me for referring to him in this context – once suggested, that torts, contracts and property form a unity, are all the same, and have no life of their own. Also, in my view, it is important that Francesco received his first academic training in Italy, a country with a rich tradition of institutional thinking and scholarship, and a country that has produced some of the most important contemporary research results for institutional economics. This tradition has always been kept alive in Italy and was not crowded out by neoclassical economics, which disregarded the economic importance of institutions. Francesco made early contacts with the civil law scholar Pietro Trimarchi from Milan, who in the late 1960s and early ‘70s, single-handedly and independently, published a series of foundational papers, which contain essential insights for our discipline. The pioneering Guido Calabresi, who has an Italian background too, once told me that he has the highest regards for Trimarchi’s","PeriodicalId":44795,"journal":{"name":"Review of Law & Economics","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2020-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88727068","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract In this note, we analyze the question of who bears an employee’s special annual payment if different external funders pay an employee’s wages over the course of a year. To answer this question, we provide a legal argument and use cooperative game theory.
{"title":"Who Bears an Employee’s Special Annual Payment?","authors":"Tobias Hiller","doi":"10.1515/rle-2019-0022","DOIUrl":"https://doi.org/10.1515/rle-2019-0022","url":null,"abstract":"Abstract In this note, we analyze the question of who bears an employee’s special annual payment if different external funders pay an employee’s wages over the course of a year. To answer this question, we provide a legal argument and use cooperative game theory.","PeriodicalId":44795,"journal":{"name":"Review of Law & Economics","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2020-02-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78560745","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Previous literature found empirical evidence to the scope-severity paradox (SSP), corresponding to situations where the perceived harm of a wrongdoing or crime decreases with the number of victims. We examine this phenomenon for the perpetrators’ side. Using a survey experiment, we examine whether increasing the number of perpetrators of a crime, namely a fraud, decreases its perceived severity (and subsequent punishment) at the individual level. Two scenarios are examined corresponding to two kinds of fraud: a fraud committed by a financial adviser against his/her own employer (scenario 1) and a tax evasion by an executive (scenario 2). Overall, our results do not offer a clear-cut support for the scope-severity paradox for the perpetrators’ side, even if some secondary results can be indicative of a possible SSP in some circumstances. More precisely, in the case of a financial fraud, the stated severity increases when the number of perpetrators is low. We discuss the implications of our results and raise important issues for future research.
{"title":"Is a ‘Bad Individual’ more Condemnable than Several ‘Bad Individuals’? Examining the Scope-severity Paradox","authors":"G. Grolleau, L. Ibanez, Naoufel Mzoughi","doi":"10.1515/rle-2019-0017","DOIUrl":"https://doi.org/10.1515/rle-2019-0017","url":null,"abstract":"Abstract Previous literature found empirical evidence to the scope-severity paradox (SSP), corresponding to situations where the perceived harm of a wrongdoing or crime decreases with the number of victims. We examine this phenomenon for the perpetrators’ side. Using a survey experiment, we examine whether increasing the number of perpetrators of a crime, namely a fraud, decreases its perceived severity (and subsequent punishment) at the individual level. Two scenarios are examined corresponding to two kinds of fraud: a fraud committed by a financial adviser against his/her own employer (scenario 1) and a tax evasion by an executive (scenario 2). Overall, our results do not offer a clear-cut support for the scope-severity paradox for the perpetrators’ side, even if some secondary results can be indicative of a possible SSP in some circumstances. More precisely, in the case of a financial fraud, the stated severity increases when the number of perpetrators is low. We discuss the implications of our results and raise important issues for future research.","PeriodicalId":44795,"journal":{"name":"Review of Law & Economics","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2020-02-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90984178","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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