American Law and Economics Review - current issue

The Economics of the Bill of Rights

Mialon, H. M., Rubin, P. H. — 2008-05-03

We elucidate, connect, and synthesize the literature that employs economics to study the individual rights and freedoms protected by the constitutional amendments comprising the Bill of Rights, especially as they relate to crime. Economics is uniquely suited to studying decisions involving tradeoffs, and each of the amendments requires tradeoffs. Emphasizing these tradeoffs allows us to discuss the constitutional rights in terms of "more or less," as opposed to taking an absolutist approach. We find that the economic literature on the amendments of the Bill of Rights is vibrant and growing, and that viewing the amendments within the framework of economics is highly useful.

How Important is State Enforcement for Trade?

Leeson, P. T. — 2008-05-03

According to conventional wisdom, state-provided contract enforcement is critical to an expansive, growing trade. This paper estimates state enforcement's impact on international trade for one hundred and fifty-seven countries over the last half a century. I find that state enforcement increases trade between nations by about fifteen to thirty-eight percent. This effect is significant though modest compared to intuition about the importance of government enforcement, the long-run growth of trade, and the estimated effect of trade's other determinants. Thus, while state enforcement appears to enhance trade, it does so less impressively than its status as essential for flourishing trade tends to suggest.

Interpreting Empirical Estimates of the Effect of Corporate Governance

Listokin, Y. — 2008-05-03

Empirical studies of corporate governance address potential endogeneity problems, but fail to place endogeneity in the context of a model and ignore the possibility of disparate treatment effects across companies. This paper tackles these defects. The model and analysis in the paper demonstrate that: (1) Valid and positive estimates for the effect of governance can only arise if there is random variation in governance and governance is systematically underproduced, or governance is chosen randomly without bias and the randomness under study concerns a subpopulation with below-average governance. (2) Governance models that correct for endogeneity using subsamples of firms, fixed effects, or instrumental variables estimates focus on subpopulations of companies that may have different responses to a governance treatment than the average firm.

Case Dismissed: Police Discretion and Racial Differences in Dismissals of Felony Charges

Tomic, A., Hakes, J. K. — 2008-05-03

Prior research has produced conflicting evidence of racial profiling during traffic stops. We instead analyze rates of case dismissal against felony arrestees by race. Superficial bias based on "unobservables" should be reduced because of the evidentiary requirements and nonnegligible costs of filing charges. Nonetheless, using data from over 58,000 US felony cases from 1990 to 1998, our probit analysis finds higher rates of dismissals for blacks for the subset of crimes that rely on police to make snap judgments. This suggests there may be more aggressive policing of blacks in these situations. Case dismissal rates are also elevated for both whites and blacks when blacks are underrepresented on local police forces.

Patent-Secret Mix in Complex Product Firms

Ottoz, E., Cugno, F. — 2008-05-03

Different protection mechanisms may be employed at the same time when an innovation is comprised of separately protectable components. If patents and trade secrets can be mixed in protecting single innovations, a strengthening in patent breadth may induce a lower level of patenting, as innovators are more prone to rely on secrecy.