We demonstrate that a direct “electoral connection” with voters motivates members of Congress to more vigorously investigate the executive branch during divided government. Our strategy for estimating the effect of the electoral connection is to leverage the enactment of 17th Amendment—which influenced the electoral mechanism for senators but not for members of the House of Representatives. This plausibly exogenous institutional variation allows us to isolate the effect of the electoral connection from other possible historical influences—such as the growth of the administrative state or the rise of political progressivism. We find that the 17th Amendment dramatically increased the Senate’s propensity to investigate during divided party control. Importantly, we also find little evidence of such an increase in the House. Our findings support the contemporary claim that congressional investigations are political tool motivated by the desire to discredit the opposition and reap individual electoral gains. (JEL D72, D73, D79)
{"title":"Congressional Investigations and the Electoral Connection","authors":"Kenneth Lowande, J. Peck","doi":"10.1093/JLEO/EWW014","DOIUrl":"https://doi.org/10.1093/JLEO/EWW014","url":null,"abstract":"We demonstrate that a direct “electoral connection” with voters motivates members of Congress to more vigorously investigate the executive branch during divided government. Our strategy for estimating the effect of the electoral connection is to leverage the enactment of 17th Amendment—which influenced the electoral mechanism for senators but not for members of the House of Representatives. This plausibly exogenous institutional variation allows us to isolate the effect of the electoral connection from other possible historical influences—such as the growth of the administrative state or the rise of political progressivism. We find that the 17th Amendment dramatically increased the Senate’s propensity to investigate during divided party control. Importantly, we also find little evidence of such an increase in the House. Our findings support the contemporary claim that congressional investigations are political tool motivated by the desire to discredit the opposition and reap individual electoral gains. (JEL D72, D73, D79)","PeriodicalId":47987,"journal":{"name":"Journal of Law Economics & Organization","volume":"33 1","pages":"1-27"},"PeriodicalIF":1.1,"publicationDate":"2016-12-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81251045","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A large and growing literature has demonstrated that imposing control on agents has the potential to backfire, leading agents to withhold effort. Consistent with principles of procedural fairness, we find that the way in which control is imposed—in particular whether control is imposed symmetrically on both principals and agents and whether both parties have a say in whether control is imposed—affects how agents respond to control. In our setting, control leads agents to withhold effort only when procedural fairness concerns are ignored and control is imposed unilaterally with an asymmetric effect on the agent. (JEL C7, C9, L2, M5)
{"title":"Procedural Fairness and the Cost of Control","authors":"Judd B. Kessler, Stephen Leider","doi":"10.1093/JLEO/EWW009","DOIUrl":"https://doi.org/10.1093/JLEO/EWW009","url":null,"abstract":"A large and growing literature has demonstrated that imposing control on agents has the potential to backfire, leading agents to withhold effort. Consistent with principles of procedural fairness, we find that the way in which control is imposed—in particular whether control is imposed symmetrically on both principals and agents and whether both parties have a say in whether control is imposed—affects how agents respond to control. In our setting, control leads agents to withhold effort only when procedural fairness concerns are ignored and control is imposed unilaterally with an asymmetric effect on the agent. (JEL C7, C9, L2, M5)","PeriodicalId":47987,"journal":{"name":"Journal of Law Economics & Organization","volume":"20 1","pages":"685-718"},"PeriodicalIF":1.1,"publicationDate":"2016-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"72970098","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
An uninformed principal elicits recommendations from privately informed agents regarding the quality of their projects, and may then further investigate the proposals. Although valuable by itself, the principal’s ability to acquire further information generally crowds out soft information, and may even worsen organizational performance. Further, the impact of further investigations on the precision of soft information is non-monotone. Activist principals are preferred over passive principals if they are always sufficiently involved. Principals that engage in selective involvement are most harmful to the organization (JEL C72, D82, D83).
{"title":"Soliciting Advice: Active versus Passive Principals","authors":"Heikki Rantakari","doi":"10.1093/JLEO/EWW002","DOIUrl":"https://doi.org/10.1093/JLEO/EWW002","url":null,"abstract":"An uninformed principal elicits recommendations from privately informed agents regarding the quality of their projects, and may then further investigate the proposals. Although valuable by itself, the principal’s ability to acquire further information generally crowds out soft information, and may even worsen organizational performance. Further, the impact of further investigations on the precision of soft information is non-monotone. Activist principals are preferred over passive principals if they are always sufficiently involved. Principals that engage in selective involvement are most harmful to the organization (JEL C72, D82, D83).","PeriodicalId":47987,"journal":{"name":"Journal of Law Economics & Organization","volume":"1 1","pages":"719-761"},"PeriodicalIF":1.1,"publicationDate":"2016-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82890294","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In Kiobel v. Royal Dutch Petroleum Co., the US Supreme Court dramatically restricted the scope of the Alien Tort Statute (ATS), holding that the statute does not permit victims of human rights abuses to sue foreign corporations for violations of international law that took place entirely abroad. We draw on three unique characteristics of the decision to estimate its effect on companies’ valuations. First, we show that extractive industry firms with headquarters abroad experienced larger cumulative abnormal returns following the ruling. By contrast, similar US-based firms—which generally remain subject to ATS liability—did not benefit from the decision. Second, we demonstrate that foreign-based firms benefited both on the final decision date and on the earlier date when the Court slated the case for reargument on the issue of extraterritoriality. Third, we show that this effect varied with the human rights records of host countries: mining firms based abroad with subsidiaries in countries with poor human rights records benefitted most. Although our results cannot resolve debates over the merit of ATS suits, we do show that the Kiobel decision mattered: for foreign firms, it decreased the cost of doing business under regimes with records of human rights violations. (JEL G14, K13, K33, K41, L72)
{"title":"Measuring the Economic Effect of Alien Tort Statute Liability","authors":"Darin Christensen, David K. Hausman","doi":"10.1093/JLEO/EWW010","DOIUrl":"https://doi.org/10.1093/JLEO/EWW010","url":null,"abstract":"In Kiobel v. Royal Dutch Petroleum Co., the US Supreme Court dramatically restricted the scope of the Alien Tort Statute (ATS), holding that the statute does not permit victims of human rights abuses to sue foreign corporations for violations of international law that took place entirely abroad. We draw on three unique characteristics of the decision to estimate its effect on companies’ valuations. First, we show that extractive industry firms with headquarters abroad experienced larger cumulative abnormal returns following the ruling. By contrast, similar US-based firms—which generally remain subject to ATS liability—did not benefit from the decision. Second, we demonstrate that foreign-based firms benefited both on the final decision date and on the earlier date when the Court slated the case for reargument on the issue of extraterritoriality. Third, we show that this effect varied with the human rights records of host countries: mining firms based abroad with subsidiaries in countries with poor human rights records benefitted most. Although our results cannot resolve debates over the merit of ATS suits, we do show that the Kiobel decision mattered: for foreign firms, it decreased the cost of doing business under regimes with records of human rights violations. (JEL G14, K13, K33, K41, L72)","PeriodicalId":47987,"journal":{"name":"Journal of Law Economics & Organization","volume":"131 1","pages":"794-815"},"PeriodicalIF":1.1,"publicationDate":"2016-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89212541","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
What is the effect of school consolidation on student achievement? Theory gives little guidance because possibly positive effects from larger school size can be offset by negative effects from reduced choice and competition. We investigate these issues empirically by analyzing the effects on students’ achievement of a consolidation reform that took place in Dutch primary education in the mid-1990s. The reform was implemented by increasing the minimum required school size, leading to an increase in actual school size and a reduction in the number of schools. For identification, we exploit variation between municipalities. We find that an increase in the minimum required school size of 10% has a small positive effect on student achievement of 0.72% of a standard deviation. Further analysis indicates that this effect can be mainly attributed to the increase in actual school size; reduced competition and choice do not seem to have harmed student achievement. We also find no evidence that the consolidation effect is driven by reduced school segregation or the elimination of small schools that were—given their size—underperforming (JEL I21, I22, H75, D40).
{"title":"School Consolidation and Student Achievement","authors":"M. D. Haan, E. Leuven, H. Oosterbeek","doi":"10.1093/JLEO/EWW006","DOIUrl":"https://doi.org/10.1093/JLEO/EWW006","url":null,"abstract":"What is the effect of school consolidation on student achievement? Theory gives little guidance because possibly positive effects from larger school size can be offset by negative effects from reduced choice and competition. We investigate these issues empirically by analyzing the effects on students’ achievement of a consolidation reform that took place in Dutch primary education in the mid-1990s. The reform was implemented by increasing the minimum required school size, leading to an increase in actual school size and a reduction in the number of schools. For identification, we exploit variation between municipalities. We find that an increase in the minimum required school size of 10% has a small positive effect on student achievement of 0.72% of a standard deviation. Further analysis indicates that this effect can be mainly attributed to the increase in actual school size; reduced competition and choice do not seem to have harmed student achievement. We also find no evidence that the consolidation effect is driven by reduced school segregation or the elimination of small schools that were—given their size—underperforming (JEL I21, I22, H75, D40).","PeriodicalId":47987,"journal":{"name":"Journal of Law Economics & Organization","volume":"33 1","pages":"816-839"},"PeriodicalIF":1.1,"publicationDate":"2016-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83123373","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Why is negative advertising such a prominent feature of competition in the US political market? We hypothesize that two-candidate races provide stronger incentives for going negative relative to non-duopoly contests: when the number of competitors is greater than two, airing negative ads creates positive externalities for opponents that are not the object of the attack. To investigate the empirical relevance of the fewness of competitors in explaining the volume of negative advertising, we exploit variation in the number of entrants running for US non-presidential primaries from 2000 through 2008. Duopolies are over twice as likely to air a negative ad when compared to non-duopolies, and the tendency for negative advertising decreases in the number of competitors. The estimates are robust to various specification checks and the inclusion of potential confounding factors at the race, candidate, and advertisement levels. (JEL D72, D79, L10, L19)
{"title":"Negative Advertising and Political Competition","authors":"Amit Gandhi, D. Iorio, Carly Urban","doi":"10.1093/JLEO/EWV028","DOIUrl":"https://doi.org/10.1093/JLEO/EWV028","url":null,"abstract":"Why is negative advertising such a prominent feature of competition in the US political market? We hypothesize that two-candidate races provide stronger incentives for going negative relative to non-duopoly contests: when the number of competitors is greater than two, airing negative ads creates positive externalities for opponents that are not the object of the attack. To investigate the empirical relevance of the fewness of competitors in explaining the volume of negative advertising, we exploit variation in the number of entrants running for US non-presidential primaries from 2000 through 2008. Duopolies are over twice as likely to air a negative ad when compared to non-duopolies, and the tendency for negative advertising decreases in the number of competitors. The estimates are robust to various specification checks and the inclusion of potential confounding factors at the race, candidate, and advertisement levels. (JEL D72, D79, L10, L19)","PeriodicalId":47987,"journal":{"name":"Journal of Law Economics & Organization","volume":"95 1","pages":"433-477"},"PeriodicalIF":1.1,"publicationDate":"2016-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80445349","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In many countries, the president is involved in appointing judges. Does this lead to selection of friendly judges who then promote the president’s interests? This question is explored here in the context of Russia, where judges are often said to favor the executive. I gather data on 2000 court cases, and analyze them by exploiting changes in the appointment rules. I find clear evidence that judges selected by the president favor the government more than do their peers. In the process, the article develops a new solution to the sample selection problem endemic to the analysis of court decisions. (JEL D02, K40, P37)
{"title":"Presidential Control of the Judiciary via the Appointment Power: Evidence from Russia","authors":"J. Shvets","doi":"10.1093/JLEO/EWW004","DOIUrl":"https://doi.org/10.1093/JLEO/EWW004","url":null,"abstract":"In many countries, the president is involved in appointing judges. Does this lead to selection of friendly judges who then promote the president’s interests? This question is explored here in the context of Russia, where judges are often said to favor the executive. I gather data on 2000 court cases, and analyze them by exploiting changes in the appointment rules. I find clear evidence that judges selected by the president favor the government more than do their peers. In the process, the article develops a new solution to the sample selection problem endemic to the analysis of court decisions. (JEL D02, K40, P37)","PeriodicalId":47987,"journal":{"name":"Journal of Law Economics & Organization","volume":"43 1","pages":"478-507"},"PeriodicalIF":1.1,"publicationDate":"2016-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77282540","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper compares the incentives of a party to acquire information prior to negotiating contractual terms with a second party. Two legal regimes are compared: disclosing information before negotiations start is mandatory or it remains voluntary. By assumption, information can only truthfully be disclosed but, under voluntary disclosure, the fact that no evidence was found cannot credibly be communicated. If the party that may acquire information enjoys encompassing bargaining power, the incentives to acquire information will be excessive relative to first best quite generally. Otherwise, more surprisingly, acquisition incentives turn out insufficient even under voluntary disclosure for an informational setting referred to as selfish acquisition. For another setting, referred to as cooperative acquisition, the incentives under voluntary disclosure are even lower as compared with mandatory disclosure. All results hold independently of the underlying bargaining structure and equilibrium selection as exclusive use of constraints is made that hold for equilibrium payoffs from any bargaining game.
{"title":"Incentives to Acquire Information under Mandatory versus Voluntary Disclosure","authors":"U. Schweizer","doi":"10.1093/JLEO/EWW007","DOIUrl":"https://doi.org/10.1093/JLEO/EWW007","url":null,"abstract":"This paper compares the incentives of a party to acquire information prior to negotiating contractual terms with a second party. Two legal regimes are compared: disclosing information before negotiations start is mandatory or it remains voluntary. By assumption, information can only truthfully be disclosed but, under voluntary disclosure, the fact that no evidence was found cannot credibly be communicated. If the party that may acquire information enjoys encompassing bargaining power, the incentives to acquire information will be excessive relative to first best quite generally. Otherwise, more surprisingly, acquisition incentives turn out insufficient even under voluntary disclosure for an informational setting referred to as selfish acquisition. For another setting, referred to as cooperative acquisition, the incentives under voluntary disclosure are even lower as compared with mandatory disclosure. All results hold independently of the underlying bargaining structure and equilibrium selection as exclusive use of constraints is made that hold for equilibrium payoffs from any bargaining game.","PeriodicalId":47987,"journal":{"name":"Journal of Law Economics & Organization","volume":"10 1","pages":"173-192"},"PeriodicalIF":1.1,"publicationDate":"2016-05-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90952582","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Market reputation is often perceived as a cheaper alternative to product liability in the provision of safety incentives. We explore the interaction between legal and reputational sanctions using the idea that inducing safety through reputation requires implementing costly "market sanctioning" mechanisms. We show that law positively affects the functioning of market reputation by reducing its costs. We also show that reputation and product liability are not just substitutes but also complements. We analyze the effects of different legal policies, and namely that negligence reduces reputational costs more intensely than strict liability, and that court errors in determining liability interfere with reputational cost reduction through law. A more general result is that any variant of an ex post liability rule will improve the functioning of market reputation in isolation. We complicate the basic analysis with endogenous prices and observability by consumers of the outcome of court’s decisions. (JEL K13, K23, L51, H24)
{"title":"Product Liability versus Reputation","authors":"J. Ganuza, F. Gomez, M. Robles","doi":"10.2139/SSRN.1986237","DOIUrl":"https://doi.org/10.2139/SSRN.1986237","url":null,"abstract":"Market reputation is often perceived as a cheaper alternative to product liability in the provision of safety incentives. We explore the interaction between legal and reputational sanctions using the idea that inducing safety through reputation requires implementing costly \"market sanctioning\" mechanisms. We show that law positively affects the functioning of market reputation by reducing its costs. We also show that reputation and product liability are not just substitutes but also complements. We analyze the effects of different legal policies, and namely that negligence reduces reputational costs more intensely than strict liability, and that court errors in determining liability interfere with reputational cost reduction through law. A more general result is that any variant of an ex post liability rule will improve the functioning of market reputation in isolation. We complicate the basic analysis with endogenous prices and observability by consumers of the outcome of court’s decisions. (JEL K13, K23, L51, H24)","PeriodicalId":47987,"journal":{"name":"Journal of Law Economics & Organization","volume":"32 1","pages":"213-241"},"PeriodicalIF":1.1,"publicationDate":"2016-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80009931","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study seeks to answer a crucial and unexplored question about American regulatory law and policy: How do majority coalitions in Congress use the spending power to circumvent intra-branch conflict and judicial constraints against regulating by finding alternate avenues to regulate states and private actors? This study provides the first large-scale empirical evidence of congressional use of the spending power to assert implementation authority in the face of constraints against more direct legislating. It is through this process of conditioning funds upon regulatory compliance that Congress works toward ideal policy outcomes without inciting institutional conflict with the other branches or from the opposing party. I base my conditional spending analysis on data on statutory specificity and congressional delegation from the 80th to the 110th Congresses provided by Farhang, and include additional measures of institutional conflict. The above argument is supported by the empirical analysis. (JEL K20, K23)
{"title":"Congressional Assertions of the Spending Power: Institutional Conflict and Regulatory Authority","authors":"Miranda Yaver","doi":"10.1093/JLEO/EWV030","DOIUrl":"https://doi.org/10.1093/JLEO/EWV030","url":null,"abstract":"This study seeks to answer a crucial and unexplored question about American regulatory law and policy: How do majority coalitions in Congress use the spending power to circumvent intra-branch conflict and judicial constraints against regulating by finding alternate avenues to regulate states and private actors? This study provides the first large-scale empirical evidence of congressional use of the spending power to assert implementation authority in the face of constraints against more direct legislating. It is through this process of conditioning funds upon regulatory compliance that Congress works toward ideal policy outcomes without inciting institutional conflict with the other branches or from the opposing party. I base my conditional spending analysis on data on statutory specificity and congressional delegation from the 80th to the 110th Congresses provided by Farhang, and include additional measures of institutional conflict. The above argument is supported by the empirical analysis. (JEL K20, K23)","PeriodicalId":47987,"journal":{"name":"Journal of Law Economics & Organization","volume":"56 1","pages":"272-305"},"PeriodicalIF":1.1,"publicationDate":"2016-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78690503","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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