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Full-Text Articles in Law

Outsourcing Regulation: How Insurance Reduces Moral Hazard, Kyle D. Logue, Omri Ben-Shahar Apr 2012

Outsourcing Regulation: How Insurance Reduces Moral Hazard, Kyle D. Logue, Omri Ben-Shahar

Law & Economics Working Papers

This article explores the potential value of insurance as a substitute for government regulation of safety. Successful regulation of behavior requires information in setting standards, licensing conduct, verifying outcomes, and assessing remedies. In some areas, the private insurance sector has technological advantages in collecting and administering the information relevant to setting standards, and could outperform the government in creating incentives for optimal behavior. The paper explores several areas in which regulation and other government-oriented forms of control are replaced by private insurance schemes. The role of the law diminishes to the administration of simple rules of absolute liability or of ...


The Effect Of Economic Integration With China On The Future Of American Corporate Law, Joseph Vining Apr 2010

The Effect Of Economic Integration With China On The Future Of American Corporate Law, Joseph Vining

Law & Economics Working Papers

China's development into a world economic power and its continuing integration with the United States economy raise the question whether China's own history and the socialist context of its domestic corporate law may affect the meaning of business terms in use both internationally and in American domestic corporate law. Of particular interest is the question whether China's entry and impact may blunt the late-twentieth century effort in the United States to change the legal sense of the purpose of an American business corporation.


The Relation Between Firm-Level Corporate Governance And Market Value: A Study Of India, Bala Balasubramanian, Bernard S. Black, Vikramaditya Khanna Apr 2010

The Relation Between Firm-Level Corporate Governance And Market Value: A Study Of India, Bala Balasubramanian, Bernard S. Black, Vikramaditya Khanna

Law & Economics Working Papers

Relatively little is known about the corporate governance practice of firms in emerging markets. We provide a detailed overview of the practices of publicly traded firms in India, and identify areas where governance practices are relatively strong or weak, relative to developed countries. We also examine whether there is a cross-sectional relationship between measures of governance and measures of firm performance and find evidence of a positive relationship for an overall governance index and for an index covering shareholder rights. The association is stronger for more profitable firms and firms with stronger growth opportunities.


The Failure Of Mandated Disclosure, Omri Ben-Shahar, Carl E. Schneider Mar 2010

The Failure Of Mandated Disclosure, Omri Ben-Shahar, Carl E. Schneider

Law & Economics Working Papers

This article explores the spectacular prevalence, and failure, of the single most common technique for protecting personal autonomy in modern society: mandated disclosure. The article has four sections:

(1) A comprehensive summary of the recurring use of mandated disclosures, in many forms and circumstances, in the areas of consumer and borrower protection, patient informed consent, contract formation, and constitutional rights;

(2) A survey of the empirical literature documenting the failure of the mandated disclosure regime in informing people and in improving their decisions;

(3) An account of the multitude of reasons mandated disclosures fail, focusing on the political dynamics underlying ...


Between Formulary Apportionment And The Oecd Guidelines: A Proposal For Reconciliation, Reuven S. Avi-Yonah May 2009

Between Formulary Apportionment And The Oecd Guidelines: A Proposal For Reconciliation, Reuven S. Avi-Yonah

Law & Economics Working Papers Archive: 2003-2009

While there have been few decided cases under the 1995 Transfer Pricing regulations and the OECD Guidelines, it is clear by now that the transfer pricing problem is as bad as it ever was. That is why my co-authors Kimberly Clausing and Michael Durst and I have recently re-proposed adopting Formulary Apportionment (FA). However, it is clear from the reactions we received that it is unlikely we will persuade advocates of the ALS and in particular the OECD that FA is the way forward (although this may change if the Obama Administration were to press the issue, or if the ...


Evolutionary Theory And The Origin Of Property Rights, James E. Krier Apr 2009

Evolutionary Theory And The Origin Of Property Rights, James E. Krier

Law & Economics Working Papers Archive: 2003-2009

Legal scholars have never settled on a satisfactory account of the evolution of property rights. The touchstone for virtually all discussion, Harold Demsetz’s Toward a Theory of Property Rights, has a number of well-known (and not so well-known) shortcomings, perhaps because it was never intended to be taken as an evolutionary explanation in the first place. There is, in principle at least, a pretty straightforward fix for the sort of evolutionary approach pursued by followers of Demsetz, but even then that approach – call it the conventional approach – fails to account for very early property rights, right at the genesis ...


The Resilience Of Law, Joseph Vining Sep 2008

The Resilience Of Law, Joseph Vining

Law & Economics Working Papers Archive: 2003-2009

The development of "law and economics" over the last half-century has expanded and reinforced a perception among academic lawyers that law itself is a social science. During the same period social science has moved closer to the discipline of natural science and the presuppositions and methods of its thought and work. This essay explores why law is not and cannot be a social science, and why there are grounds for hope in a future for democracy grounded in the rule of law.


China, Business Law, And Finance -- Accession To The World Trade Organization, Joseph Vining Sep 2008

China, Business Law, And Finance -- Accession To The World Trade Organization, Joseph Vining

Law & Economics Working Papers Archive: 2003-2009

China's entry into the world economy will affect not just how we act but how we think. It will affect especially what "business," "business law," and "business corporation" come to mean both in a transnational setting and in American law. The nature of American business law today still stands in the way of a wholly profit-maximizing approach to law or the world in general. But there is strong pressure, consistent with a general tendency in Western thought, to make business and corporate decision-making entirely manipulative and calculating and to eliminate the force of human value from it. This Youde ...


Accredited Indians: Increasing The Flow Of Private Equity Into Indian Country As A Domestic Emerging Market, Gavin Clarkson Mar 2008

Accredited Indians: Increasing The Flow Of Private Equity Into Indian Country As A Domestic Emerging Market, Gavin Clarkson

Law & Economics Working Papers Archive: 2003-2009

Indian Country is America’s domestic emerging market, and as in a number of emerging markets, many successful businesses in Indian Country are starving for expansion capital. The US Treasury estimates that the private equity deficit in Indian Country is $44 billion. While the handful of wealthier tribes might be logical investors in private equity funds deploying capital in Indian Country, the existing securities laws present a significant impediment. In particular, Regulation D of the Securities Act of 1933 does not treat tribes as “accredited investors,” thus denying those tribes the ability to participate in the private equity market. Since ...


How To Repair Unconscionable Contracts, Omri Ben-Shahar Dec 2007

How To Repair Unconscionable Contracts, Omri Ben-Shahar

Law & Economics Working Papers Archive: 2003-2009

Several doctrines of contract law allow courts to strike down excessively one-sided terms. A large literature explored which terms should be viewed as excessive, but a related question is often ignored—what provision should replace the vacated excessive term? This paper begins by suggesting that there are three competing criteria for a replacement provision: (1) the most reasonable term; (2) a punitive term, strongly unfavorable to the overreaching party; and (3) the maximally tolerable term. The paper explores in depth the third criterion—the maximally tolerable term—under which the excessive term is reduced merely to the highest level that ...


Paying To Save: Tax Withholding And Asset Allocation Among Low- And Moderate-Income Taxpayers, Michael S. Barr, Jane Dokko Nov 2007

Paying To Save: Tax Withholding And Asset Allocation Among Low- And Moderate-Income Taxpayers, Michael S. Barr, Jane Dokko

Law & Economics Working Papers Archive: 2003-2009

We analyze the phenomenon that low- and moderate-income (LMI) tax filers exhibit a “preference for over-withholding” their taxes, a measure we derive from a unique set of questions administered in a dataset of 1,003 households, which we collected through the Survey Research Center at the University of Michigan. We argue that the relationship between their withholding preference and portfolio allocation across liquid and illiquid assets is consistent with models with present-biased preferences, and that individuals exhibit self-control problems when making their consumption and saving decisions. Our results support a model in which individuals use commitment devices to constrain their ...


Greed And Pride In International Bankruptcy: The Problems And Proposed Solutions To “Local Interests”, John A. E. Pottow Jul 2006

Greed And Pride In International Bankruptcy: The Problems And Proposed Solutions To “Local Interests”, John A. E. Pottow

Law & Economics Working Papers Archive: 2003-2009

From just-enacted (2005) chapter 15 of the U.S. Bankruptcy Code to the U.K. Enterprise Act of 2002, legislative reforms to international bankruptcy are on the rise. One of the thorniest issues facing scholars and policymakers alike in these efforts is what to do with the nettlesome problem of “local interests.” What exactly are these “local interests,” and what is it that we are we trying to protect? Literature to date has been elusive in pinning this down and has offered, for the most part, only undifferentiated anxiety that an international bankruptcy regime may impinge undesirably upon “local concerns ...


Rev. Proc. 2005-24 And The Upc Elective Share, Lawrence W. Waggoner Aug 2005

Rev. Proc. 2005-24 And The Upc Elective Share, Lawrence W. Waggoner

Law & Economics Working Papers Archive: 2003-2009

This article discusses Revenue Procedure 2005-24, which came as a bombshell to the estate-planning bar. The Rev. Proc. requires a spousal waiver of elective-share rights in order for a charitable remainder annuity trust (CRAT) or a charitable remainder unitrust (CRUT) created on or after June 28, 2005, to qualify for a charitable deduction. The elective share is a statutory provision common to most probate codes in non-community-property states that protect a decedent’s surviving spouse against disinheritance.

The Rev. Proc. is primarily though apparently not exclusively addressed to the elective share of the Uniform Probate Code (UPC). Unfortunately, the Rev ...


Partial Ban On Plea Bargains, Oren Gazal Aug 2005

Partial Ban On Plea Bargains, Oren Gazal

Law & Economics Working Papers Archive: 2003-2009

The influence of the plea bargaining system on innocent defendants is fiercely debated. Many scholars call for a ban on plea bargaining, arguing that the practice coerces innocent defendants to plead guilty. Proponents of plea bargaining respond that even an innocent defendant is better off when he choose to plea bargain in order to assure a lenient result, if he concludes that the risk of wrongful trial conviction is too high. They claim that since plea bargaining is only an option, it cannot harm the defendant whether he is guilty or innocent. This paper argues that the both supporters and ...


The Real Impact Of Eliminating Affirmative Action In American Law Schools: An Empirical Critique Of Richard Sander's Study, David L. Chambers, Timothy T. Clydesdale, William C. Kidder, Richard O. Lempert May 2005

The Real Impact Of Eliminating Affirmative Action In American Law Schools: An Empirical Critique Of Richard Sander's Study, David L. Chambers, Timothy T. Clydesdale, William C. Kidder, Richard O. Lempert

Law & Economics Working Papers Archive: 2003-2009

In an article in Stanford Law Review, Richard Sander argues that the practice of American law schools of taking race into account in admissions to law school perversely leads to fewer black lawyers entering the bar each year than would be the case without affirmative action. Sander’s claim is that, while ending affirmative action would reduce somewhat the number of black students admitted to any law school, there would in the end be more black lawyers because those black students who do attend law school would no longer attend schools where they are over their heads academically and would ...


Credit Where It Counts: Maintaining A Strong Community Reinvestment Act, Michael S. Barr May 2005

Credit Where It Counts: Maintaining A Strong Community Reinvestment Act, Michael S. Barr

Law & Economics Working Papers Archive: 2003-2009

The Community Reinvestment Act (CRA) has helped to revitalize low- and moderate-income communities and provided expanded opportunities for low- and moderate-income households. Recent regulatory steps aimed at alleviating burdens on banks and thrifts are unwarranted, and may diminish small business lending as well as community development investments and services. This policy brief explains the rationale for CRA, demonstrates its effectiveness, and argues that the recent regulatory proposals should be withdrawn or significantly modified.


Institutions And Inclusion In Saving Policy, Michael S. Barr, Michael Sherraden May 2005

Institutions And Inclusion In Saving Policy, Michael S. Barr, Michael Sherraden

Law & Economics Working Papers Archive: 2003-2009

No abstract provided.


Modes Of Credit Market Regulation, Michael S. Barr May 2005

Modes Of Credit Market Regulation, Michael S. Barr

Law & Economics Working Papers Archive: 2003-2009

No abstract provided.


Credit Where It Counts: The Community Reinvestment Act And Its Critics, Michael S. Barr Apr 2005

Credit Where It Counts: The Community Reinvestment Act And Its Critics, Michael S. Barr

Law & Economics Working Papers Archive: 2003-2009

Despite the depth and breadth of U.S. credit markets, low- and moderate-income communities and minority borrowers have not historically enjoyed full access to credit. The Community Reinvestment Act (CRA) was enacted in 1977 to help overcome barriers to credit that these groups faced. Scholars have long leveled numerous critiques against CRA as unnecessary, ineffectual, costly, and lawless. Many have argued that CRA should be eliminated. By contrast, I contend that market failures and discrimination justify governmental intervention and that CRA is a reasonable policy response to these problems. Using recent empirical evidence, I demonstrate that over the last decade ...


The Deregulation Of International Trucking In The European Union: Form And Effect, Francine Lafontaine, Laura M. Valeri Apr 2005

The Deregulation Of International Trucking In The European Union: Form And Effect, Francine Lafontaine, Laura M. Valeri

Law & Economics Working Papers Archive: 2003-2009

This paper examines how the deregulation of the international road transport industry in Western Europe has affected 1- the total quantity of cross-border road transport in the region; 2- the degree to which shippers outsource rather than integrate vertically their cross-border transport needs; and 3- the extent to which different countries participate in international road freight transport in Western Europe. Not surprisingly, we find that deregulation has had a large positive effect on the amount of international road transport net of the effect of the trade ties that grew over time among European Union countries. Moreover, consistent with the fact ...


Globalization, Law & Development: Introduction And Overview, Michael S. Barr, Reuven S. Avi-Yonah Apr 2005

Globalization, Law & Development: Introduction And Overview, Michael S. Barr, Reuven S. Avi-Yonah

Law & Economics Working Papers Archive: 2003-2009

No abstract provided.


Microfinance And Financial Development, Michael S. Barr Apr 2005

Microfinance And Financial Development, Michael S. Barr

Law & Economics Working Papers Archive: 2003-2009

No abstract provided.


The Cyclical Transformations Of The Coporate Form: A Historical Pespective On Corporate Social Responsibility, Reuven S. Avi-Yonah Feb 2005

The Cyclical Transformations Of The Coporate Form: A Historical Pespective On Corporate Social Responsibility, Reuven S. Avi-Yonah

Law & Economics Working Papers Archive: 2003-2009

This Article describes the transformations underwent by the corporate form from its Roman origins to the present. It shows that every time there was a shift in the role of the corporation, three theories of the corporation (the aggregate, artificial, and real entity theories) were brought forward in cyclical fashion. However, every time the real entity theory prevailed, and it is the dominant theory during periods of stability in the relationship between the corporation, the shareholders, and the state. The article describes this evolution in detail, and then attempts to derive normative consequences for the legitimacy of corporate social responsibility ...


How Liability Distorts Incentives Of Manufacturers To Recall Products, Omri Ben-Shahar Jan 2005

How Liability Distorts Incentives Of Manufacturers To Recall Products, Omri Ben-Shahar

Law & Economics Working Papers Archive: 2003-2009

The nature and likelihood of harms associated with products may be revealed over time. As more information is gathered, a manufacturer must decide whether to continue selling the product as is, or to recall it. The paper shows that existing products liability law gives the manufacturers bad incentive to recall products. It shows, counter-intuitively, that as the post-recall liability becomes more severe, manufacturers would be more likely to leave products in the market longer and more often than is socially desirable. It also demonstrates that the law hurts the incentives of manufacturers to acquire better information about the riskiness of ...


Procedural Incrementalism: A Model For International Bankruptcy, John A. E. Pottow Jan 2005

Procedural Incrementalism: A Model For International Bankruptcy, John A. E. Pottow

Law & Economics Working Papers Archive: 2003-2009

From Parmalat to Yukos, the pace of cross-border bankruptcy filings has been accelerating. Scholarly attention and policy reform have increasingly focused on the financial distress of enterprises with assets and creditors dispersed throughout multiple jurisdictions. Yet despite ongoing globalization and economic integration, insolvency law has remained stubbornly resistant to treaties and other international efforts to design some form of unified, global regime for resolving private financial defaults. Part of the reason progress remains so elusive is that two competing paradigms of international bankruptcy – universalism and territorialism – continue to divide academics and policymakers alike. Proposed treaties premised on one approach have ...


Screening, Plea Bargains And The Innocent Problem, Oren Gazal Nov 2004

Screening, Plea Bargains And The Innocent Problem, Oren Gazal

Law & Economics Working Papers Archive: 2003-2009

Courts in common law countries reject plea-agreements only when the agreed upon sentence is seen as exceedingly lenient. This judicial intervention is designed to ensure that plea-bargaining does not undermine deterrence. Many legal scholars argue against this policy, claiming that courts should prohibit plea-bargaining all together. They argue that the plea-bargaining system increases the risk of wrongful convictions. Economists often criticize this judicial intervention as well, but for a different reason. Rather than advocating the abolition of plea-bargaining, many economists argue that the courts should accept all plea-agreements without review. They claim that plea-bargaining can help ensure an efficient use ...


Plea Bargains Only For The Guilty, Oren Gazal, Oren Bar-Gill Nov 2004

Plea Bargains Only For The Guilty, Oren Gazal, Oren Bar-Gill

Law & Economics Working Papers Archive: 2003-2009

A major concern with plea bargains is that innocent defendants will be induced to plead guilty. This paper argues that the law can address this concern by providing prosecutors with incentives to select cases in which the probability of guilt is high. By restricting the permissible sentence reduction in a plea bargain the law can preclude plea bargains in cases where the probability of conviction is low (L cases). The prosecutor will therefore be forced to – (1) select fewer L cases and proceed to trial with these cases; or (2) select more cases with a higher probability of conviction (H ...


The Coordinated Effects Of Mergers In Differentiated Products Market, Kai-Uwe Kuhn Nov 2004

The Coordinated Effects Of Mergers In Differentiated Products Market, Kai-Uwe Kuhn

Law & Economics Working Papers Archive: 2003-2009

No abstract provided.


An Ex-Ante View Of The Battle Of The Forms: Inducing Parties To Draft Reasonable Terms, Omri Ben-Shahar Oct 2004

An Ex-Ante View Of The Battle Of The Forms: Inducing Parties To Draft Reasonable Terms, Omri Ben-Shahar

Law & Economics Working Papers Archive: 2003-2009

This paper focuses on one type of ex-ante effect of the battle of the forms: the incentive to draft reasonable boilerplate terms. It argues that the experience with the battle-of-the-forms rule under the CISG reinforces what we already know, that existing legal solutions do not provide any incentive for the parties to draft reasonable forms. The paper suggests that the goal of inducing parties to draft reasonable terms can be significantly promoted by a third rule, a variant of the “best-shot” rule proposed by Victor Goldberg. Under the version labeled the “reasonable-shot” rule, the court would resolve the battle of ...


Corporate Defendants And The Protections Of Criminal Procedure: An Economic Analysis, Vikramaditya S. Khanna Sep 2004

Corporate Defendants And The Protections Of Criminal Procedure: An Economic Analysis, Vikramaditya S. Khanna

Law & Economics Working Papers Archive: 2003-2009

Corporations are frequently treated as “persons” under the law. One of the fundamental questions associated with this treatment is whether corporations should receive the same Constitutional protections and guarantees as natural persons. In particular, should corporations receive the Constitutional protections of Criminal Procedure? After all, corporations cannot be sent to jail so the sanctions they face are essentially the same as in civil proceedings. If so, then why not have the same procedural protections for corporate defendants in civil and criminal cases? Little scholarly analysis has focused on this issue from an economic perspective and this article aims to fill ...