Derivatives Trading and Negative Voting

This paper exposits a model of parallel trading of corporate securities (shares, bonds) and derivatives in which a large trader can sometimes profitably acquire securities with their corporate control rights for the sole purpose of reducing the corporations value and gaining on a net short position created through off-setting derivatives. At other times, the large trader profitably takes a net long position. The large trader requires no private information beyond its own trades. The problem is most likely to manifest when derivatives trade on an exchange and transactions give blocking powers to small minorities, particularly out-of-bankruptcy restructurings and freezeouts

Does US mass incarceration work? When you look at other countries, the numbers just don’t add up.

Despite a declining prison population, the US still sends more people to jail per capita than any other country. But does this predilection towards incarceration lead to lower crime rates? By relating crime and incarceration data to country-specific data on measures such as development and social policy Holger Spamann finds that the US’ incarceration rate is a distinct outlier given the amount of crime it experiences. He writes that the incarceration gap may be down to factors such as poor race relations, but that it is more likely that the US’ policy of mass incarceration simply doesn’t do enough to deter or prevent crime

The Myth of 'Rebalancing' Retaliation in WTO Dispute Settlement Practice

It is generally assumed that trade retaliation under the WTO performs some kind of ‘rebalancing’ by allowing the injured Member to suspend ‘concessions and obligations’ vis-à-vis the violating Member of a level equivalent to the level of ‘nullification and impairment’ suffered by the injured Member. This article argues that this perception is misguided. The article first questions if a sensible comparator exists with which equivalence for purposes of ‘rebalancing’ could be evaluated. It then argues that WTO arbitration decisions do not even succeed in their limited goal of providing for retaliation that will affect trade in the same amount as the WTO-inconsistent measure at issue. One reason is the use of an asymmetric and underspecified trade effects comparator. The other reason is very significant miscalculation of the trade effects of the violation, as shown by detailed legal-economic analysis of all relevant arbitration decisions. The decisions concerning countermeasures against prohibited export subsidies do not make any attempt at ‘rebalancing’ in the first place. The article considers political explanations of arbitration decisions. It concludes with some suggestions for improvement

Legal Origins, Civil Procedure, and the Quality of Contract Enforcement

This paper empirically compares civil procedure in common-law and civil-law countries. Using World-Bank and hand-collected data, and unlike earlier studies that used predecessor data sets, this paper finds no systematic differences between common- and civil-law countries in the complexity, formalism, duration, or cost of procedure in courts of first instance. The paper further finds that by a subjective measure, contract enforceability in common-law countries is higher than in French, but lower than in German and Scandinavian, civil-law countries. Given civil procedure's central role for the common-civil-law distinction, these findings challenge the distinction's economic relevance

Empirical Comparative Law

I review the empirical comparative law literature with an emphasis on quantitative work. After situating the field and surveying its main applications to date, I turn to methodological issues. I discuss at length the obstacles to causal inference from comparative data, and caution against inappropriate use of instrumental variables and other techniques. Even if comparative data cannot identify any single causal theory, however, they are extremely important in narrowing down the set of plausible theories. I report progress in measurement design, and suggest improvements in data analysis and interpretation using techniques from other fields, particularly growth econometrics

Essays in Applied Microeconomics

Chapter 1 develops a model of parallel trading of corporate securities (shares, bonds) and derivatives in which a large trader can sometimes profitably acquire securities and the corporate control rights inherent therein for the sole purpose of reducing the corporation's value and gaining on a net short position in the corporation created through off-setting derivatives. At other times, the large trader profitably takes a net long position in the corporation and exercises its control rights to maximize the corporation's value. This strategy is profitable if and because other market participants cannot observe the large trader's orders and hence cannot predict how the control rights will be exercised. In effect, the large trader is benefitting from trading on private information about payoff uncertainty that the large trader itself creates. This problem is most likely to manifest in transactions that give blocking powers to small minorities, particularly out-of-bankruptcy restructurings and freezeouts, and is bound to become more severe when derivatives trade on an exchange rather than over-the-counter. Chapter 2 investigates in parallel the cross-country determinants of crime and punishment in the largest possible sample of countries with data on homicides, victimization by common crimes (ICVS), incarceration rates, and the death penalty. While models with a small number of plausible covariates predict much of the variation of homicide and incarceration rates between major developed countries, they predict only one seventh of the actual US incarceration rate. Chapter 3 probes into the pervasive correlations between legal origins, modern regulation, and economic outcomes around the world. Where legal origin is exogenous, it is almost perfectly correlated with another set of potentially relevant background variables: the colonial policies of the European powers that spread the "origin" legal systems through the world. The chapter attempts to disentangle these factors by exploiting the imperfect overlap of colonizer and legal origin, and looking at possible channels, such as the structure of the legal system, through which these factors might influence contemporary economic outcomes. It find strong evidence in favor of non-legal colonial explanations for economic growth. For other dependent variables, the results are mixed.Economic