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Abstract: The knowledge of the relationship between tax compliance and numerous personality traits is limited. Willingness to pay taxes is defined and assessed in abundant ways; studies are mostly limited to the Big Five facets, producing ambiguous and theoretically not sufficiently underpinned results. Therefore, the present study explores the relationships between the Big Five personality traits, HEXACO Honesty-Humility, Machiavellianism, and the slippery slope model factors of tax compliance to understand who and why is more likely to comply with taxpaying than others.We applied the social dilemma theory as a framework and CFA, OLS linear regression and dominance analysis on the survey data of 350 respondents. We found that HEXACO Honesty-Humility, Machiavellianism, and Agreeableness affect more factors of tax compliance than the other examined personality traits. We argue that this is because HEXACO Honesty-Humility, Machiavellianism, and Agreeableness are directly linked to the dilemma of prioritising selfish or prosocial actions. Honesty-Humility seems to relate to almost all factors of tax compliance and, thus, seems to be the most important personal determinant of tax compliance. Our research goes beyond the literature findings, as we found individual effects between personality traits and individual tax compliance factors. Consequently, they do not have a linkage between personality traits and tax compliance as a general phenomenon, but they exert different directions and extents regarding the specific tax compliance factors. PubDate: 2025-05-28
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Abstract: We consider the case of a firm selling a product which may cause harm to others. The firm can engage in an R&D project to discover a new substitution product, which may be more dangerous than the historical product. To decrease the likelihood of facing such a case of “regrettable substitution”, the firm can make a “safeness” effort to try to design a less dangerous product. We compare three policy regimes (civil liability and approval systems, these latter ones being used in combination, or not, with a ban on the old product) according to their impact on the firm’s decisions and their consequences on social welfare. We find that the ranking between policy regimes mainly depends on the public regulator’s expertise, the firm’s ability to derive market value from public approval, and the characteristics of the risk under consideration: a high probability of the product causing harm gives social value to civil liability, while a high magnitude of harm tends to give more value to an approval system with a ban on the old product. PubDate: 2025-05-22
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Please help us test our new pre-print finding feature by giving the pre-print link a rating. A 5 star rating indicates the linked pre-print has the exact same content as the published article.
Abstract: This paper examines a model with multiple actors, each of whom faces a binary action choice. The action choice imposes harm on a victim that depends on the number of actors who enter or, alternatively, who deviate from a due care standard. The paper examines incentive and welfare effects from per-capita liability under simultaneous as well as sequential action choice. The challenge is to cope with due care standards that, for whatever reasons, need not be efficient. As it turns out, welfare is enhanced in any equilibrium as compared to the situation where none of the actors enter or, alternatively, where all of them meet the due care standard. The range of parameter values, however, where a welfare maximizing outcome in equilibrium is induced by per-capita liability turns out to be rather limited. As an alternative rule, efficient per-capita liability is proposed that would lead to an efficient outcome quite generally for simultaneous as well as sequential action choice. PubDate: 2025-04-22
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Abstract: Despite extensive literature focusing on the concept of supply-induced demand, there remains a notable dearth of contributions in law and economics. This paper seeks to address this gap by investigating the role of tax advisors in stimulating the demand for litigation in a specific case. To this aim, the paper analyses data from Italy concerning advisors who can push the client to litigate an allegation of the tax authority that could otherwise be solved. The information imbalance between advisors and taxpayers can determine an incentive for the former group to promote litigation to gain from these legal causes. We observe that this phenomenon may be mainly observed in regions in which there is low economic activity, and then not only the opportunity cost for accountants to devote themselves to more lucrative activities is lower, but indeed, litigation can represent an additional source of income, thus representing a profit-maximizing strategy. The results suggest that SID does not depend on the specific field but on the agency relationship, coupling a fiduciary duty with with a mandatory decision to be taken in a short time span. PubDate: 2025-03-04
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Abstract: Integrating and cross-comparing the findings of existing leniency experiments, this paper highlights multiple important experimental phenomena related to the effectiveness of leniency. The information extracted from existing leniency experiments provides useful guidelines for policy-making. In addition, this paper shows that auxiliary experimental settings may subtly influence the experimental results. Importantly, this paper explains that external validity issues are not trivial for the inferences of leniency experiments. Overlooking these external validity issues may lead to underestimation or overestimation of the effectiveness of leniency. Thus, this paper suggests that the interpretation of leniency experiments’ findings and policy recommendations should be based on relevant prior knowledge from other fields, e.g., economics, law, and psychology, as well as the theoretical and empirical studies in the field of leniency. Moreover, future leniency experiments can further enrich the understanding of this topic if existing external validity issues are addressed. PubDate: 2025-02-24
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Abstract: During the COVID-19 pandemic, political competition among the premiers of Germany’s 16 federal states intensified, with leaders striving to position themselves as proactive forerunners in managing the crisis. This paper examines the timing and determination of these state leaders in announcing, legislating, and enforcing COVID-19 policies, with attention to regional contexts and specific determinants influencing their actions. Utilizing multiple distinct databases, we conduct a survival analysis to assess each state’s political response in relative terms. Our findings reveal that state leaders who were early advocates in public announcements and discourse did not necessarily lead in formal legislation or enforcement of COVID-19 measures. This study provides a nuanced view of political competition in crisis governance, highlighting the divergence between political rhetoric and tangible policy action across Germany’s federal landscape. PubDate: 2025-02-07
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Please help us test our new pre-print finding feature by giving the pre-print link a rating. A 5 star rating indicates the linked pre-print has the exact same content as the published article.
Abstract: We study markets’ reactions towards securities issued by firms that announce an external auditor’s retention instead of an external auditor’s rotation. We focus on differences in reactions to announcements when markets are stable versus when markets are convulsed. We carry out an event study of publicly traded Chilean companies (100% of the non-financial component of the main Chilean Stock Indexes) that announced a rotation or retention from 2004 to 2019. In the period 2009 to 2012, two major corporate scandals significantly affected Chilean financial markets. We find that, during the period without scandals, the market reacted more positively when a company announced a retention instead of a rotation of its auditor, however, during the period with scandals, the market reacted more positively when a company announced a rotation instead of a retention of its auditor. Our results suggest that, during the period without (with) scandals, the start-up costs and know how losses of an auditor’s change dominated (were dominated by) the improvements in auditor’s independence associated with this change. Additional results, obtained from tests performed with data subsamples, are consistent with our hypothesis and uncover differences between the announcements’ factual and perceived effects. We end by discussing the implications for firms and regulators. PubDate: 2025-02-03
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Abstract: This study investigates the effects of art theft on art auction sales. In particular, it focuses on the impact on the auction sales when an artist’s artwork has been stolen and reported in a public list of stolen art. By using criminal data from Interpol’s International Stolen Works of Art Database (SWoA) from 2002 to 2016 all over the world, and auction data concerning all lots put at auction by Christie’s, Sotheby’s, and Phillips in New York and London between 2012 and 2016, we build a hand-collected data on top-tier international auction sales of modern and contemporary artists whose artwork have previously been stolen. The empirical analysis is based on an economic framework of the art auction and on hedonic regression models to test the effect of theft on auction prices. The results hint at a negative effect of theft on the prices of the artworks at market level, which gets stronger as the number of reported stolen artworks from the same artist increases. Overall, the paper provides a nuanced understanding of the complex incentives and disincentives surrounding the reporting of stolen artworks, emphasising the need to balance private interests with broader goals of art theft prevention and recovery. It invites further exploration of potential solutions and their practicality in addressing these conflicts of interest in the art world. PubDate: 2025-02-01
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Abstract: We empirically test the predictions of the Political Legislation Cycle (PLC) theory about decrees using official disaggregated data about five types of decrees of the Italian legal system: law-decrees (decreti legge), legislative decrees (decreti legislativi), DPR (decrees of the President of the Republic), implementing decrees (decreti attuativi) and independent decrees (decreti indipendenti). The sample period includes the first 17 legislatures of the parliament of the Italian Republic. The estimates of the counts of decrees are conducted through a a multilevel negative binomial regression model—plus other estimating techniques adopted for robustness checks. The results broadly confirm the theory’s prediction that decrees tend to be approved in the earlier stages of the legislature or of the life of a government; this prediction receives stronger support the more the institutional characteristics of each type of decree resemble the theoretical variable. A battery of placebo and robustness checks confirms the result, showing the heuristic importance of combining the knowledge of specific legislative institutions coming from studies of constitutional law to the analytics provided by economics. The estimates also reveal that, while the government’s ideology has a limted impact on the production of decrees, the “legislative practices” of the single governments of the Italian Second Republic affect it in a more noticeable way. Finally, the analysis confirms the prediction of the PLC theory about the legislators’ choice of the legislative instruments through which they satisfy the conflicting interests of special interest groups and voters, shedding light on the timing of activity and the legislative preferences of lobbies. PubDate: 2025-01-27
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Abstract: The rental building sector faces challenges due to the so-called landlord-tenant dilemma. This issue arises because landlords have no direct financial benefits from energy efficiency retrofits if the tenant pays the energy bill. On the other hand, tenants have little motivation to save energy if the landlord covers this cost. The primary landlord-tenant dilemma results from rent control limiting rent levels in existing tenancies. The secondary dilemma is due to the undervaluation of energy cost savings in the new rental market. Tenancy law, through the allocation system for energy and retrofit costs, can either address or worsen these issues. This paper develops an analytical model to examine how efficiently various allocation systems incentivize retrofits and energy conservation and how they compare in terms of improving the welfare of both landlords and tenants. I analyze several systems: a free market model without and with rent control, the current German system, a slight variation of the German system, the Swedish inclusive rent system, a consumption-based partially inclusive rent system, and a novel demand-based partially inclusive rent system. The German status quo could theoretically offer optimal incentives if it were ideally set up; however, it interacts in a complex way with other aspects of German tenancy law, hindering optimal design. In contrast, the demand-based partially inclusive rent system is more likely to set efficient incentives consistently but would require substantial reforms in tenancy law. PubDate: 2025-01-17
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Abstract: The emergence of the FinTech industry has created new dilemmas for financial regulators and supervisors who need to balance the goal of promoting innovation in finance with the traditional objectives of financial stability and market integrity. In order to address the challenges related to FinTech, regulators in many countries have utilized institutional innovations like regulatory sandboxes and innovation hubs. Although these solutions are popular and widely praised in the existing literature on FinTech, there is limited knowledge of their actual impacts. We employ the critical lenses that Law & Economics offers to gauge the impacts of regulatory sandboxes and innovation hubs for FinTech in the three Baltic states. Our comparative analysis indicates that in Lithuania and Latvia, FinTech regulatory sandboxes have not lived up to the praise they have received in the literature. In contrast, the innovation hubs for FinTechs in all three countries have offered wide-ranging benefits for the regulators and FinTech companies. PubDate: 2024-12-20
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Abstract: We argue in this article that constant-quality models like the one used to derive the Alchian–Allen effect are of very limited use in the analysis of the regulation of repugnant goods (morally contested goods ranging from human organs to sex work, pornography, and surrogate motherhood). The Alchian–Allen effect has often been applied in the literature on the regulation of repugnant goods, for instance to suggest that a common unit cost imposed on alcoholic drinks will lead the consumer to substitute less potent alcoholic drinks for more potent alcoholic drinks. Various authors have suggested that this effect is so broadly relevant that we should speak of an iron law of prohibition: “the harder the enforcement, the harder the drugs.” We demonstrate that the Alchian–Allen effect has a narrow domain of validity, does not always suggest that regulation has adverse effects, and its predicted effects depend strongly on the goods selected for analysis. Moreover, real-world regulations do not impose a common unit cost. Therefore, the Alchian–Allen effect is not helpful to analyze the regulation of repugnant goods. We further highlight the relevance of Barzel’s work on the incompleteness of regulation, and the importance of quality adjustments in response to regulation. PubDate: 2024-12-09
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Abstract: This paper investigates the determinants of punitive attitude toward cartels and documents the factors underlying the support for harsher sanctions against these anticompetitive practices. The responses are collected in an experimental design in which participants are exposed to various levels of cartel-type agreement costs. This experimental manipulation allows us to highlight the fact that individuals are more punitive when they are victims of cartels that reduce their earnings. In addition, punitiveness increases in the number of cartels experienced. Overall, punitive attitudes toward cartels are influenced by socio-demographic variables such as age and education level. Being a man is also associated with higher punitiveness. Last, the perceived seriousness of cartels and cartel awareness, are associated with higher punitive attitudes. PubDate: 2024-11-29
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Abstract: The average duration of first-instance criminal trials has steadily increased in Italy over the last 20 years. Over the same period, the use of both plea bargaining and penal orders has steadily decreased. This situation contradicts the predictions of the economic models of plea bargaining since longer trials, by imposing higher costs on both prosecutors and defendants, should result in a greater use of trial-avoiding procedures. The phenomenon can be explained by the unique regulation of the Italian statute of limitations: if trials last longer than a certain time threshold, defendants must be acquitted, regardless of the evidence collected against them. Hence, longer trials reduce defendants’ incentives towards the use of trial-avoiding procedures that result in a criminal conviction. In an instrumental variable analysis on a panel of 140 first-instance judicial districts over the period 2005–2021 I find that longer first-instance trials decrease the use of both plea bargaining and penal orders in Italy. The results of the analysis call for a reform of the Italian statute of limitations, considering its perverse effect on defendants’ incentives. PubDate: 2024-11-28
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Abstract: Clawback provisions entitle shareholders to recover previously-awarded compensation from managers involved in accounting manipulation or misconduct. In a principal-agent model, we show that strong clawback enf... PubDate: 2024-04-24
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Abstract: Using a representative sample of 391 Serbian accounting practitioners, we explored the association between their perceptions, attitudes, and characteristics and the tax compliance of their small business clien... PubDate: 2024-03-11
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Abstract: The aim of auditing is to protect active and potential investors from accounting fraud. Nevertheless, as many auditing scandals have demonstrated, auditing has a dark side. Correct auditing is a public good pr... PubDate: 2023-11-16
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Abstract: The expenditure method of Pissarides and Weber (J Public Econ 39(1):17–32, 1989) shows how one backs out measure of income underreporting by the self-employed by using food consumption as trace of true income.... PubDate: 2023-06-09
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