Archive for the ‘Social Science Research Network’ Category

Do Private Prisons Distort Justice? Evidence on Time Served and Recidivism

July 15, 2015 Comments off

Do Private Prisons Distort Justice? Evidence on Time Served and Recidivism
Source: Social Science Research Network

I contribute new evidence on the impact of private prisons on prisoner time served and recidivism by exploiting the staggered entry and exit of private prisons in Mississippi between 1996 and 2004. Little is known about this topic, even though burgeoning prison populations and an effort to cut costs have caused a substantial level of private contracting since the 1980s. The empirical challenge is that prison assignment may be based on traits unobservable to the researcher, such as body tattoos indicating a proclivity for violent behavior. My first result is that private prisons increase a prisoner’s fraction of sentence served by an average of 4 to 7 percent, which equals 60 to 90 days; this distortion directly erodes the cost savings offered by privatization. My second result is that prisoners in private facilities are 15 percent more likely to receive an infraction (conduct violation) over the course of their sentences, revealing a key mechanism by which private prisons delay release. Conditional on receiving an infraction, prisoners in private prison receive twice as many. My final result is that there is no reduction in recidivism for prisoners in private prison despite the additional time they serve, suggesting that either the marginal returns to incarceration are low, or private prisons increase recidivism risk. These results are consistent with a model in which the private prison operator chooses whether to distort release policies, i.e., extend prisoner time served beyond the public norm, based on the typical government contract that pays a diem for each occupied bed and is imperfectly enforced.

Bankruptcy and Bad Behavior – The Real Moral Hazard: Law Schools Exploiting Market Dysfunction

July 9, 2015 Comments off

Bankruptcy and Bad Behavior – The Real Moral Hazard: Law Schools Exploiting Market Dysfunction
Source: American Bankruptcy Institute Law Review, Forthcoming (via SSRN)

The widespread discussion about the market for law graduates ignores an essential fact: it’s not a single market at all. Employment opportunities vary dramatically across schools, yet tuition prices fail to reflect those differences. As a consequence, many schools with the worst placement rates burden their students with the highest levels of educational debt. How is that possible?

The answer is market dysfunction. Current federal student loan and bankruptcy policies encourage all law school deans to maximize tuition and fill classrooms, regardless of their students’ job prospects upon graduation. This law school moral hazard combines with prelaw students’ unrealistic expectations about their legal careers to produce enormous debt for a JD degree that, for many graduates, does not even lead to a JD-required job.

This article proposes a way to identify three distinct law school submarkets. Using those submarkets, it offers a plan to create a more functional market that enhances law school accountability, encourages meaningful price differences among schools based on outcomes, and spurs innovation.

How Fox News Changed American Media and Political Dynamics

July 8, 2015 Comments off

How Fox News Changed American Media and Political Dynamics
Source: Social Science Research Network

The creation of Fox News in 1996 was an event of deep, yet unappreciated, political and historical importance. For the first time, there was a news source available virtually everywhere in the United States, 24 hours a day, 7 days a week, with a conservative tilt. Finally, conservatives did not have to seek out bits of news favorable to their point of view in liberal publications or in small magazines and newsletters. Like someone dying of thirst in the desert, conservatives drank heavily from the Fox waters. Soon, it became the dominant – and in many cases, virtually the only – major news source for millions of Americans. This has had profound political implications that are only starting to be appreciated. Indeed, it can almost be called self-brainwashing – many conservatives now refuse to even listen to any news or opinion not vetted through Fox, and to believe whatever appears on it as the gospel truth.

Donor Governance and Financial Management in Prominent U.S. Art Museums

June 29, 2015 Comments off

Donor Governance and Financial Management in Prominent U.S. Art Museums
Source: Social Science Research Service

I study “donor governance,” which occurs when contributors to non-profit firms place restrictions on their gifts to limit the discretion of managers. In a study of U.S. art museums, I find that this practice has grown significantly in recent years, and it represents the largest source of permanent capital in the industry. When donor restrictions are strong, museums shift their cost structures away from administration and toward program services, and they exhibit very high savings rates, retaining in their endowments 45 cents of each incremental dollar donated. Retention rates are near zero for cash generated from other activities. Restricted donations appear to stabilize non-profits and significantly influence their activities, but they reduce management flexibility and may contribute to lower profit margins. Rising donor governance in U.S. art museums may represent a reaction by contributors to the industry’s high rates of financial distress, weak boards of trustees, and large private benefits of control enjoyed by managers.

Humblebragging: A Distinct – And Ineffective – Self-Presentation Strategy

June 16, 2015 Comments off

Humblebragging: A Distinct – And Ineffective – Self-Presentation Strategy
Source: Social Science Research Network

Humblebragging – bragging masked by a complaint – is a distinct and, given the rise of social media, increasingly ubiquitous form of self-promotion. We show that although people often choose to humblebrag when motivated to make a good impression, it is an ineffective self-promotional strategy. Five studies offer both correlational and causal evidence that humblebragging has both global costs – reducing liking and perceived sincerity – and specific costs: it is even ineffective in signaling the specific trait that that a person wants to promote. Moreover, humblebragging is less effective than simply complaining, because complainers are at least seen as sincere. Despite people’s belief that combining bragging and complaining confers the benefits of both self-promotion strategies, humblebragging fails to pay off.

Discount Rate (Risk-Free Rate and Market Risk Premium) Used for 41 Countries in 2015: A Survey

May 27, 2015 Comments off

Discount Rate (Risk-Free Rate and Market Risk Premium) Used for 41 Countries in 2015: A Survey
Source: Social Science Research Network

This paper contains the statistics of a survey about the Risk-Free Rate (RF) and of the Market Risk Premium (MRP) used in 2015 for 41 countries. We got answers for 68 countries, but we only report the results for 41 countries with more than 25 answers.

The average (RF) used in 2015 was smaller than the one used in 2013 in 26 countries (in 11 of them the difference was more than 1%). In 8 countries the average (RF) used in 2015 was more than a 1% higher than the one used in 2013.

The change between 2013 and 2015 of the average Market risk premium used was higher than 1% for 13 countries. Most of the respondents use for US, Europe and UK a Risk-Free Rate (RF) higher than the yield of the 10-year Government bonds.

Corporate Speech and the First Amendment: History, Data, and Implications

May 16, 2015 Comments off

Corporate Speech and the First Amendment: History, Data, and Implications
Source: Social Science Research Network

This Article draws on empirical analysis, history, and economic theory to show that corporations have begun to displace individuals as direct beneficiaries of the First Amendment and to outline an argument that the shift reflects economically harmful rent seeking. The history of corporations, regulation of commercial speech, and First Amendment case law is retold, with an emphasis on the role of constitutional entrepreneur Justice Lewis Powell, who prompted the Supreme Court to invent corporate and commercial speech rights. The chronology shows that First Amendment doctrine long post-dated both pervasive regulation of commercial speech and the rise of the U.S. as the world’s leading economic power – a chronology with implications for originalists, and for policy. Supreme Court and Courts of Appeals decisions are analyzed to quantify the degree to which corporations have displaced individuals as direct beneficiaries of First Amendment rights, and to show that they have done so recently, but with growing speed since Virginia Pharmacy, Bellotti, and Central Hudson. Nearly half of First Amendment challenges now benefit business corporations and trade groups, rather than other kinds of organizations or individuals, and the trend-line is up. Such cases commonly constitute a form of corruption: the use of litigation by managers to entrench reregulation in their personal interests at the expense of shareholders, consumers, and employees. In aggregate, they degrade the rule of law, rendering it less predictable, general and clear. This corruption risks significant economic harms in addition to the loss of a republican form of government.


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