Optimal penalty and accounting policy

This study considers risky investment projects under adverse selection and examines optimal penalties for erroneous auditing reports to maximize social welfare. These penalties give firms an incentive to choose accounting policies that maximize social welfare. We characterize the optimal penalties such that efficient firms choose an aggressive accounting policy and inefficient firms choose a conservative accounting policy.     

FRAMING OF INCENTIVES AND EFFORT PROVISION

A prospect theory model combining loss aversion and diminishing sensitivity predicts that the link between incentives framing and effort is ambiguous: small penalties yield higher effort, but isomorphic contracts with large penalties decrease effort. We conduct two experiments (a framed field and a conventional lab experiment) in which economically equivalent contracts are framed as menus of either (i) bonuses, (ii) penalties, or (iii) bonuses and penalties. The experimental results confirm the main intuition of the model as subjects performed best when bonuses and penalties are combined. A follow‐up lottery experiment confirms that both loss aversion and diminishing sensitivity influenced the performance.     

Tax Evasion and Limited Liability

Andreoni, Erard, and Feinstein (1998) suggest that imposing very high penalties for tax evasion is not possible under bankruptcy or limited liability constraints. In this paper, we complement their suggestion by showing that, in the presence of these constraints, imposing very high penalties can make an economy Pareto worse‐off. This result helps provide a further insight into why governments typically do not set very high penalties for tax evasion in practice. Implications for optimal deterrence policies in the context of tax evasion are also explored.     

论环境刑事责任实现方式的发展趋势

环境刑事责任实现方式一般划分为刑罚方式与非刑罚方式。环境刑事责任的实现方式主要体现了两个发展趋势：在刑罚措施上财产刑将取代自由刑扩大适用,相应的资格刑也将不断引入适用,这是其一;其二,以刑罚措施为基础,非刑罚实现方式将在环境犯罪中越来越多地得到适用。而非刑罚化的发展趋势更是现代刑法转制的新方向。     

TIME, MONEY, AND OPTIMAL CRIMINAL PENALTIES

The economic approach to optimal criminal penalties measures the welfare effects of crime and punishment in dollar terms, ignoring differences in the marginal utility of money among people. This paper alternatively proposes using time as the unit of measure in determining optimal criminal penalties, measuring the costs and benefits of crime in hours or days instead of dollars. The policy implications differ substantially from those in the existing economic literature. Equal prison terms impose similar time costs on all individuals rather than being more costly for those with higher foregone earnings. Equal fines impose the same cost on all individuals in the dollar-based economic models but in a time-denominated system are costlier to those who require more time to earn the money to pay the fines. In principle, one can use either money or time in setting penalties. However, time-based penalties are more consistent with the fundamental and widely held principles of justice on which the U.S. legal system rests.     

Selecting a unique competitive equilibrium with default penalties

The enlargement of the general-equilibrium structure to allow for default subject to penalties results in a construction of a simple mechanism for selecting a unique competitive equilibrium. We consider economies for which a common credit money can be applied to uniquely select each of the competitive equilibria with suitable default penalties. We identify two classes of such economies.     

会计师事务所受监管部门处罚的因素分析——来自中国资本市场审计监管的经验证据

通过研究中国证监会的审计监管行为,文章发现客户质量和事务所专业性是影响会计师事务所是否受到证监会处罚的重要因素。事务所审计客户的平均盈利水平越高,应收账款的水平越低,事务所被证监会处罚的概率就越小。事务所业务的行业集中度越高,被证监会处罚的概率也越低。上述发现在剔除了四大会计师事务所之后仍然存在,而且不随变量度量方式的变化而改变,也不随证监会监管体制的变化而改变。     

Toward a benchmark for optimal prudency policy

This paper presents a benchmark model of prudency policy. The incidence and the financial implications of optimal prudence reviews are examined in a stylized setting. In the environment considered, prudence reviews optimally occur following particularly unfavorable performance by the regulated firm, and they impose expected penalties on the firm. However, rewards as well as penalties from prudence reviews are generally optimal. Furthermore, the risk and expected penalties associated with prudence reviews decline as the regulator's ex ante assessment of the firm's activities becomes more favorable.We are grateful to the National Science Foundation for financial support, and to Sanford Berg, Eugene Brigham, Joel Demski, Carl Pechman, and two anonymous referees for very helpful comments.     

Penalties and the deterrence of unlawful collusion

This paper investigates the size of penalties required to deter cartel formation. Allowing the penalty to be increasing in duration within the infinitely repeated game framework, penalties do not need to be as severe as previous research would suggest.     

Harsh default penalties lead to Ponzi schemes

In the presence of utility penalties, collateral requirements do not always eliminate the occurrence of Ponzi schemes. Harsh utility penalties may induce effective payments over collateral recollection values. In this event, loans can be larger than collateral costs and Ponzi schemes become possible.     

WAGE PENALTIES AND SEXUAL ORIENTATION: AN UPDATE USING THE GENERAL SOCIAL SURVEY

This study uses data from the 1988 to 2006 General Social Survey (GSS) to examine the effects of sexual orientation on earnings. Previous research using the GSS has found that lesbians earn 18%–23% more than similarly qualified heterosexual women and that wage penalties for gay men are slightly larger than the premia for lesbians. Using behavioral definitions of sexual orientation based on the previous year and the previous 5 yr of sexual activity, we find the familiar wage premia/penalties for lesbian/gay workers in our ordinary least squares estimations, but we find that these wage differences are falling over time. Furthermore, in contrast to the earlier results, for our regressions over the entire sample period, correcting for differential selection into full-time work reduces the estimated penalties for unmarried gay men and eliminates the entire wage premium for all lesbians. There is now a sizeable, though imprecisely measured, penalty for some lesbians. ( JEL J1, J3, J7)     

Horizontal mismatch and vocational education

ABSTRACT

Recent literature suggests that vocational education and training (VET) provides individuals with smoother transitions into the labour market but lower wages over the lifecycle, compared to general education. A possible mechanism explaining lower wages is horizontal mismatch, defined as a mismatch between the type of qualifications acquired by individuals and those required for their current job. Some studies have found higher mismatch wage penalties when individuals’ education is more specific, suggesting higher penalties for workers with VET. Therefore, we analyse horizontal mismatch in Switzerland, the country with the highest proportion of firm-based VET in the OECD. We use two measures from the Swiss Household Panel that cover different aspects of horizontal mismatch. While we find sizable mismatch wage penalties in OLS estimations, effects are small or insignificant in fixed-effects regressions. This holds for workers with vocational and general education background alike. We conclude that VET is more transferable than often assumed. We finish with recommendations on concept and methods for future analyses of horizontal mismatch.     

Managerial risks and rewards in public enterprises

This essay explores a twofold problem: from the standpoint of the community, what is the appropriate attitude for managers of a public enterprise to have toward decisions with uncertain outcomes; and what is implied for the managerial rewards or penalties that are required to induce managers to adopt that attitude. Taking a theorem of Arrow's as a point of departure, the essay argues that managers should be induced to maximize expected benefit. With the aid of “career” and “bonus” functions, implications for managerial rewards and penalties are explored under     

THE IMPORTANCE OF PUNISHMENT SUBSTITUTABILITY IN CRIMINOMETRIC STUDIES

This study investigates the role of punishment substitutability in the empirical estimation of the economic model of crime. Using a dynamic panel data model fitted to a panel of Local Government Areas in New South Wales, Australia, we evaluate the effects of financial penalties and imprisonment on the crime rate. Our results show that crime is clearly a dynamic phenomenon, and that failure to incorporate both financial penalties and imprisonment can lead to a misspecified model. Furthermore, our results vary significantly for different crime categories, highlighting the importance of analysing specific crime categories separately.     

Default and aggregate income

This paper studies how default varies with aggregate income. We analyze a model in which optimal contracts enable risk sharing of privately observed, idiosyncratic income by allowing for default. Default provisions allow agents with low idiosyncratic income realizations to repay less and thus provide insurance. Default penalties ensure that only these agents default. We show that default can occur under the optimal contract and that default provisions vary with aggregate income. We provide conditions such that both the amount of default and default penalties vary countercyclically with aggregate income and show that the default rate can be discontinuous.     

A Tax Evasion Model with Allowance for Retroactive Penalties*

Discrete models of tax evasion are considered when evasion has occurred over a period of several years. Allowance is made for growth in income, investment of illicit gains from successful evasion, and the imposition of retroactive penalties. Retroactive penalties increase deterrence of evasion if introduced at a point where evasion has been continuing for some years, since the utility gain from continuing successful evasion is unaffected, whereas the utility loss will be increased regardless of attitude to risk. Prohibitive penalty rates are determined, and a range of penalty rates are given in which some dishonest taxpayers may become honest. The formulation of the basic model and consequent conclusions are relevant to the current Australian taxation scene.     

Credible Currency: A Constitutional Perspective

By contrast to private banks, public monetary authorities – central banks and currency boards – have limited credibility in making redemption or fixed-exchange-rate commitments. Their sovereign immunity obviates legal penalties for devaluing, and their monopoly status weakens reputational penalties. The softness of central bank promises invites speculative attack and currency crises. Privatization and decentralization of exchange-rate commitments provides a more credible currency by making redemption commitments legally enforceable and reputable. This contrast sheds light on (1) the breakdown of the classical gold standard and (2) the costs and benefits of dollarization. JEL Classification: E42, H42.     

Personalist Economics: Moral Convictions,Economic Realities,And Social Action

We examine the relationship between the administrative enforcement of environmental regulation, ethnic heterogeneity, and other community characteristics in New Jersey and New York. We find that the percentage of non-white population in a community is positively related with administrative penalties imposed on violators. However, penalties are lower in more ethnically diverse communities. This result may be due to the fact that these communities are less likely to coordinate to create solidarity across ethnic groups and demand stronger enforcement.     

NEW INSIGHTS INTO THE DECLINE OF ANTITRUST ENFORCEMENT

The total number of cases that the Antitrust Division has filed during the past decade has increased, but the number of significant criminal price-fixing cases has declined. Policy changes have had significant effects on other areas of enforcement. This paper argues, however, that the decline in this dimension of antitrust enforcement can be explained by a 1974 act of Congress that increased criminal penalties for price-fixing violations from the misdemeanor level to the felony level. According to this argument, the stiffer penalties' deterrent impact has reduced the supply of antitrust violations. In this respect, the analysis highlights the flaws in measuring the strength of enforcement from the frequency of cases filed. In addition, the paper reports empirical evidence from a multinomial logit model of defendant plea choice indicating that the felony penalties encourage defendants to plead not guilty more frequently. Furthermore, data on the outcomes of criminal antitrust cases reveal that the government has greater difficulty in obtaining convictions when felony penalties apply. From the viewpoint of enforcers, these findings imply that detecting and prosecuting significant price-fixing violations is more difficult. This, in turn, helps explain the reduction in related private enforcement.     

EXAMINING REGULATORY CAPTURE: EVIDENCE FROM THE NHL

Regulatory capture has garnered significant attention, but poses a difficult empirical exercise since most relationships between regulators and regulated parties occur behind closed doors. In this research, we overcome this problem by analyzing an environment where the behavior of both the regulator and regulated parties are publicly available. Specifically, we utilize data from the National Hockey League (NHL) to examine the impact of general experience as a referee as well as experience refereeing a particular team on the assignation of penalties. We find that gaining general experience as a referee significantly reduces the number of penalties that a referee assigns. However, as a referee gains experience refereeing a specific team, they significantly reduce the number of penalties assessed to this team relative to teams that they have less experience refereeing, confirming that regulatory capture is observed among referees and teams in the NHL. (JEL G18, L51, K42)