Law and Economics Commons^™

Noncompete Agreements In The U.S. Labor Force, Evan P. Starr, J.J. Prescott, Norman D. Bishara

Articles

Using nationally representative survey data on 11,505 labor force participants, we examine the use and implementation of noncompete agreements and the employee outcomes associated with these provisions. Approximately 18 percent of labor force participants are bound by noncompetes, with 38 percent having agreed to at least one in the past. Noncompetes are more likely to be found in high-skill, high-paying jobs, but they are also common in low-skill, low-paying jobs and in states where noncompetes are unenforceable. Only 10 percent of employees negotiate over their noncompetes, and about one-third of employees are presented with noncompetes after having already accepted job …

Constitutional Review Of Federal Tax Legislation, Reuven S. Avi-Yonah, Yoseph M. Edrey

Law & Economics Working Papers

What does the Constitution mean when it says that “The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States” (US Const. Article I, Section 8, Clause 1)? The definition of “tax” for constitutional purposes has become important in light of the Supreme Court’s 2012 decision in NFIB v. Sebelius, in which Chief Justice Roberts for the Court upheld the constitutionality of the individual mandate of the Affordable Care Act under the taxing power. This has led to commentators questioning …

Coca Cola: A Decisive Irs Transfer Pricing Victory, At Last, Reuven S. Avi-Yonah, Gianluca Mazzoni

Law & Economics Working Papers

Coca Cola v. Commissioner (Tax Court, Nov. 18, 2020) is the first decisive IRS victory in a major transfer pricing case since 1979. If the outcome is not reversed on appeal, this will mark an important shift in transfer pricing litigation in the US, and perhaps indicate that the IRS could win some of the other major pending cases, like the one against Facebook.

A Feminist Economic Perspective On Contract Law: Promissory Estoppel As An Example, Orit Gan

Michigan Journal of Gender & Law

Economic analysis is a highly influential theoretical approach to contract law. At the same time, feminist analysis of contract law offers an important critical approach to the field. However, feminist economics, a prominent alternative approach to mainstream neo-classical economics drawing from both economic theory and feminist theory, has only been applied scarcely and sporadically to contract law. This Article seeks to bridge this gap and to apply the key features of feminist economics to an analysis of the doctrine of promissory estoppel. This Article uses promissory estoppel as an example to demonstrate a feminist economic analysis of contract law.

Alternative Trading Platforms In The United States: Incentives For Innovation In The Us Stock Market, Gabriel V. Rauterberg

Book Chapters

Is something wrong with the structure of our stock market? Recent scholarship faults the equity market for its lack of innovation. In particular, commentators stringently criticize the continuous nature of modern trading for baking in a wasteful arms race for speed among high-frequency traders. Under their current structure, stock exchanges process incoming instructions to trade in the order they arrive and as quickly as possible, which means in millionths of a second or less. The result is a race for technological speed because market participants can earn profits from being the first to trade on new information, even when that …

Aligned: Sex Workers’ Lessons For The Gig Economy, Yvette Butler

Michigan Journal of Race and Law

Society’s perception of a type of work and the people who engage in money-generating activities has an impact on whether and how the law protects (or does not protect) the people who perform those activities. Work can be legitimized or delegitimized. Workers are protected or left out to dry depending upon their particular “hustle.” This Article argues that gig workers and sex workers face similar challenges within the legal system and that these groups can and should collaborate to their collective advantage when seeking reforms. Gig workers have been gaining legitimacy while sex workers still primarily operate in the shadow …

Multinational Activity In The Modern World, James R. Hines Jr., Fritz C. Foley, Raymond J. Malatoni Jr., David Wessel

Book Chapters

Multinational corporations are the global goliaths of modern times. These entities collectively are responsible for large portions of world production, employment, investment, international trade, research, and innovation. Although their economic impact is most pronounced in high-income countries, where their activities have been concentrated historically, their reach increasingly extends to every corner of the world. Decisions made by these firms affect not only those who work for them, buy from them, do business with them, and compete with them, but also communities and countries in which they are located. As a result, their operations and activities are subjects of considerable interest …

Principles For Policymakers, James R. Hines Jr.

Book Chapters

Multinational corporations are global goliaths, but they have not conquered the world, nor are they responsible for every economic ill, as is sometimes alleged. These firms contribute to global prosperity by improving productivity and efficiency, innovating, and creating jobs-mostly good jobs-in both home and host countries. Governments lavish attention on multinational corporations, seeking the good that accompanies their investments even as policymakers worry about the influence multinational firms have on the local environment, social conditions, and politics. In this regard, governments face the tradeoffs that commonly afflict economic policymaking. Efforts to control the actions of multinational firms typically come at …

Overcoming Political Polarization: Federal Funding Of Education Is The Key, Reuven S. Avi-Yonah

Law & Economics Working Papers

The best way of overcoming political polarization in the US (the last two elections were both decided by fewer than 100,000 votes in WI, MI, PA (2016) and WI, AZ, GA (2020)) is to reduce disparities in education. But how can we do that?

The basic problem arises from the US system of funding K-12 education from property taxes. While the picture above refers to college education, it is K-12 education that determines both college admissions and college readiness.

Thus, the only viable solution is a federal solution. As President Nixon proposed in 1972, the United States should adopt an …

Overcoming Political Polarization: Federal Funding Of Education Is The Key, Reuven S. Avi-Yonah

Law & Economics Working Papers

The best way of overcoming political polarization in the US (the last two elections were both decided by fewer than 100,000 votes in WI, MI, PA (2016) and WI, AZ, GA (2020)) is to reduce disparities in education. But how can we do that? The basic problem arises from the US system of funding K-12 education from property taxes. While the picture above refers to college education, it is K-12 education that determines both college admissions and college readiness. Thus, the only viable solution is a federal solution. As President Nixon proposed in 1972, the United States should adopt an …

The Behavioral Effects Of (Unenforceable) Contracts, Evan Starr, Jj Prescott, Norman Bishara

Articles

Do contracts influence behavior independent of the law governing their enforceability? We explore this question in the context of employment noncompetes using nationally representative data for 11,500 labor force participants. We show that noncompetes are associated with reductions in employee mobility and changes in the direction of that mobility (i.e., toward noncompetitors) in both states that do and do not enforce noncompetes. Decomposing mobility into job offer generation and acceptance, we detect no evidence of differences in job search, recruitment, or offer activity associated with noncompetes. Rather, we find that employees with noncompetes—even in states that do not enforce them—frequently …

Recovery For Causing Tax Overpayment - Lyeth V. Hoey And Clark Revisited, Douglas A. Kahn, Jeffrey H. Kahn

Law & Economics Working Papers

The question has arisen in numerous cases as to the extent to which a settlement between arms’ length parties is dispositive in tax cases of the claims on which the settlement is based. Another issue that often arises is whether the receipt of compensation for a tax payment that was incurred because of the negligence of the payor is excluded from gross income. While those two issues were central to the proper resolution of a recent case in the United States Court of Appeals for the Eleventh Circuit, McKenny v. United States, the court failed even to note one of …

Recovery For Causing Tax Overpayment - Lyeth V. Hoey And Clark Revisited, Douglas A. Kahn, Jeffrey H. Kahn

Law & Economics Working Papers

The question has arisen in numerous cases as to the extent to which a settlement between arms’ length parties is dispositive in tax cases of the claims on which the settlement is based. Another issue that often arises is whether the receipt of compensation for a tax payment that was incurred because of the negligence of the payor is excluded from gross income. While those two issues were central to the proper resolution of a recent case in the United States Court of Appeals for the Eleventh Circuit, McKenny v. United States, the court failed even to note one of …

Do Lawyers Need Economists? Review Of Katja Langenbucher, Economic Transplants: On Lawmaking For Corporations And Capital Markets (Cambridge U. Press, 2017), Reuven S. Avi-Yonah

Law & Economics Working Papers

Katja Langenbucher’s outstanding book seeks to address the question of why and in what ways have lawyers been importing economic theories into a legal environment, and how has this shaped scholarly research, judicial and legislative work? Since the financial crisis, corporate or capital markets law has been the focus of attention by academia and media. Formal modelling has been used to describe how capital markets work and, later, has been criticized for its abstract assumptions. Empirical legal studies and regulatory impact assessments offered different ways forward. This excellent book presents a new approach to the risks and benefits of interdisciplinary …

Class Actions And Private Antitrust Litigation, Albert H. Choi, Kathryn E. Sprier

Law & Economics Working Papers

When firms collude and charge supra-competitive prices, consumers can bring antitrust lawsuits against the firms. When the litigation cost is low, firms accept the cost as just another cost of doing business, whereas when the cost is high, the firms lower the price to deter litigation. Class action is modeled as a mechanism that allows plaintiffs and attorneys to obtain economies of scale. We show that class actions, and the firms' incentive to block them, may or may not be socially desirable. Agency problems, settlement, fee-shifting, treble damages, public enforcement, and sustaining collusion through repeat play are also considered.

Federal Forum Provisions And The Internal Affairs Doctrine, Dhruv Aggarwal, Albert H. Choi

Law & Economics Working Papers

A key question at the intersection of state and federal law is whether corporations can use their charters or bylaws to restrict securities litigation to federal court. In December 2018, the Delaware Chancery Court answered this question in the negative in the landmark decision Sciabacucchi v. Salzberg. The court invalidated “federal forum provisions” (“FFPs”) that allow companies to select federal district courts as the exclusive venue for claims brought under the Securities Act of 1933 (“1933 Act”). The decision held that the internal affairs doctrine, which is the bedrock of U.S. corporate law, does not permit charter and bylaw provisions …

Working Hard Or Making Work? Plaintiffs' Attorneys Fees In Securities Fraud Class Actions, Stephen J. Choi, Jessica Erickson, A. C. Pritchard

Articles

In this article, we study attorney fees awarded in the largest securities class actions: “mega- settlements.” Consistent with prior work, we find larger fee awards but lower percentages in these cases. We also find that courts are more likely to reject or modify fee requests made in connection with the largest settlements. We conjecture that this scrutiny provides an incentive for law firms to bill more hours, not to advance the case, but to help justify large fee awards—“make work.” The results of our empirical tests are consistent with plaintiffs’ attorneys investing more time in litigation against larger companies, with …

A Case For Higher Corporate Tax Rates, Edward G. Fox, Zachary D. Liscow

Law & Economics Working Papers

In this report, Fox and Liscow argue that, while conventional wisdom holds that we should lower taxes on corporations because of international competition, two recent changes militate in favor of higher corporate taxes, which would close the deficit, fund social programs, and reduce inequality. First, changes in tax law have increasingly targeted the corporate tax at economic “rents,” the supersized returns that businesses receive when they enjoy advantages like market power. Because taxing rents is progressive and does little to harm economic activity, a higher rate is justified. Second, shifts in the American economy have allowed companies to earn more …

"Do Lawyers Need Economists?" Review Of Economic Transplants: On Lawmaking For Corporations And Capital Markets, Reuven S. Avi-Yonah

Reviews

Katja Langenbucher’s outstanding book seeks to address the question of why and in what ways have lawyers been importing economic theories into a legal environment, and how has this shaped scholarly research, judicial and legislative work? Since the financial crisis, corporate or capital markets law has been the focus of attention by academia and media. Formal modelling has been used to describe how capital markets work and, later, has been criticized for its abstract assumptions. Empirical legal studies and regulatory impact assessments offered different ways forward. This excellent book presents a new approach to the risks and benefits of interdisciplinary …

Taxes In The Time Of Coronavirus: Is It Time To Revive The Excess Profits Tax?, Reuven S. Avi-Yonah

Law & Economics Working Papers

A recent NY Times headline summarizes one of the biggest economic impacts of the current pandemic: “Big Tech Could Emerge From Coronavirus Crisis Stronger Than Ever.” At a time when most American citizens and businesses suffer catastrophic economic damage from the Coronavirus Recession, some corporations such as Amazon, 3M, Gilead, and Zoom see their profits rise dramatically because of the pandemic. Given that most corporations are losing money but some are now earning excess profits due to the crisis, it is time to revive the wartime excess profits taxes that the US deployed in WW1 and WW2 to prevent the …

Covid-19 And Us Tax Policy: What Needs To Change?, Reuven S. Avi-Yonah

Law & Economics Working Papers

The COVID-19 Pandemic already feels like a historical turning point akin to Word Wars I and II and the Great Depression. It may signal the end of the second period of globalization (1980-2020) and a change in the relative positions of the US and China. It could also lead in the US to significant changes in tax policy designed to bolster the social safety net which was revealed as very porous during the pandemic. In what follows I will first discuss some short-term effects of the pandemic and then some potential longer-term effects on US tax policy.

Taxation And Business: The Human Rights Dimension Of Corporate Tax Practices, Reuven S. Avi-Yonah

Law & Economics Working Papers

If we want to narrow the North-South divide that threatens our world, some limits on tax competition are inevitable. The world faces a crucial choice in the 2020s. We can either continue retreating from globalization in favor of xenophobic nationalism, tariffs, immigration restrictions, and exchange controls. That road leads ultimately to war, as it did in the 1930s. Or we can revive globalization by investing in a robust social safety net, infrastructure, education, and job creation. While more needs to be done, we have made significant progress in curbing tax competition in the last decade. The key move now is …

Income Inequality, Progressive Taxation And Tax Expenditures, James R. Hines Jr.

Book Chapters

There are important and growing concerns about income inequality in the United States and other high-income countries. These concerns reflect rising apprehension about the political and social consequences of inequality and worries that the advance of technology, expanding international trade and investment, and other economic developments may have significantly widened income gaps in recent decades and will continue to do so in the future. In the United States, these concerns have prompted renewed calls for political activism and vigorous searches for policy measures that might improve the relative economic positions of low- and middle-income Americans.

There are many ways in …

Legitimacy And Agency Implementation Of Title Ix, Samuel R. Bagenstos

Law & Economics Working Papers

Because Title IX of the Education Amendments of 1972 involves a subject that remains highly controversial in our polity (sex roles and interactions among the sexes more generally), and because it targets a highly sensitive area (education), the administration of that statute by the Department of Education's Office for Civil Rights has long drawn criticism. The critics have not merely noted disagreements with the legal and policy decisions of the agency, however. Rather, they have attacked the agency’s decisions for being illegitimate—for reflecting the agency’s improper imposition of value judgments on the statute. Three key applications of Title IX have …

Should Us Tax Law Be Constitutionalized? Centennial Reflections On Eisner V. Macomber (1920), Reuven S. Avi-Yonah

Law & Economics Working Papers

The US Supreme Court last decided a federal tax case on constitutional grounds in 1920, a century ago. The case was Eisner v. Macomber, and the issue was whether Congress had the power under the Sixteenth Amendment (authorizing an income tax, 1913) to include stock dividends in the tax base. The Court answered no because “income” in the Sixteenth Amendment meant “the gain derived from capital, from labor, or from both combined.” A stock dividend, since it did not increase the wealth of the shareholder, was not “income.” Macomber was never formally overruled, and it is sometime still cited by …

May Hospitals Withhold Ventilators From Covid-19 Patients With Pre-Existing Disabilities? Notes On The Law And Ethics Of Disability-Based Medical Rationing, Samuel R. Bagenstos

Law & Economics Working Papers

Thanks to the coronavirus pandemic, the threat of medical rationing is now clear and present. Hospitals faced with a crush of patients must now seriously confront questions of how to allocate scarce resources—notably life-saving ventilators—at a time of severe shortage. In their protocols for addressing this situation, hospitals and state agencies often employ explicitly disability-based distinctions. For example, Alabama’s crisis standards of care provide that “people with severe or profound intellectual disability ‘are unlikely candidates for ventilator support.’” This essay, written as this crisis unfolds, argues that disability-based distinctions like these violate the law. The Americans with Disabilities Act, the …

Acknowledgements As A Window Into Legal Academia, W. Nicholson Price Ii, Jonathan Tietz

Law & Economics Working Papers

Legal scholarship in the United States is an oddity—an institution built on student editorship, a lack of peer review, and a dramatically high proportion of solo authorship. It is often argued that this makes legal scholarship fundamentally different from scholarship in other fields, which is largely peer-reviewed by academics. We use acknowledgments in biographical footnotes from law-review articles to probe the nature of legal knowledge co-production and de facto peer review in legal literature. Using a survey of authors and editors and a textual analysis of approximately thirty thousand law-review articles from 2008 to 2017, we examined the nature of …

The 'Authority' Of Law: Joseph Raz Reconsidered, Andrew Stumpff Morrison

Law & Economics Working Papers

The article presents a critical reassessment of the legal philosophical writings of Joseph Raz. The critique develops from the author’s previous argument that law is – contra recent near-consensus – best understood as “the command of the sovereign, backed by force.” Given that this is the distinctly defining feature of law, Raz’s extended preoccupation with “reasons for obeying law” is misplaced and even nonsensical.

Constructive Dialogue: Beps And The Tcja, Reuven S. Avi-Yonah

Law & Economics Working Papers

US international tax law is commonly conceived as developed in the US and influencing the development of other countries' international tax law. This paper will argue that in the case of the TCJA, the US legislation was heavily influenced by the OECD BEPS project, and that the continuing OECD work in Pillars I and II is likely to have a similar influence on the future development of US international tax law.

Why Study Tax History?, Reuven S. Avi-Yonah

Law & Economics Working Papers

This book review addresses the question why studying tax history is helpful to tax policy makers and practitioners.