Dhammika Dharmapala

This paper develops an economic analysis of the application of the law of restitution to the case of void contracts, when agreements may be unenforceable due to legal invalidity. It develops a simple model in which contracting parties' agreements potentially impose external harms. The analysis focuses on how alternative restitution regimes affect contracting incentives when there is a possibility that agreements may turn out to be unenforceable. A central insight is that in a setting in which contract invalidity is possible, contracting requires not merely that the parties' joint surplus is positive but also that a participation constraint is satisfied for each party (as there are states of the world in which the parties cannot redistribute the surplus between themselves). We show that full restitution can induce socially excessive contracting, while the denial of restitution can inefficiently deter welfare-enhancing transactions. A regime of partial restitution can potentially implement first-best outcomes by calibrating parties' incentives to the probability and magnitude of potential external harms. In essence, this regime can serve as a substitute for a Pigovian tax on the contracting parties. The paper discusses applications of this framework to the interest rate swap cases of the 1990s and to other contexts.

Tax havens have become a subject of great interest among policymakers, scholars and the general public, and are central to many important current policy debates. This chapter provides an overview of the scholarly literature on the characteristics and origins of tax havens. The earlier literature used cross-country analysis and found evidence that tax havens tend to have stronger governance institutions than comparable nonhaven countries. The more recent literature analyzes the historical origins of tax havens and undertakes longitudinal analysis of their adoption of haven-like laws. This chapter also presents a novel descriptive analysis of the relationship between tax haven status and quantitative measures of countries’ historical characteristics. This descriptive analysis suggests that tax haven jurisdictions – while more likely to have been formerly British-ruled – are not otherwise appreciably different from nonhavens in their historical experience of foreign rule and in other historical characteristics.

U.S. law requires the Attorney General to collect data on hate crime victimization from states and municipalities, but states and localities are under no obligation to cooperate by gathering or sharing information. Data production hence varies considerably across jurisdictions. This paper addresses the ensuing “missing data” problem by imputing unreported hate crimes using Google search rates for a racial epithet. It uses two alternative benchmarks for which jurisdictions more effectively collect hate crime data: all states that were not part of the erstwhile Confederacy, and those states with statutory provisions relating to hate crime reporting. We regress rates of racially-motivated hate crimes with African-American victims on Google searches and other relevant variables over 2004–2015 at the state-year level for each group of benchmark states. Adding the Google search rate for the epithet substantially enhances the model’s predictive power among benchmark states. We use the results of these regressions to impute hate crime rates, out-of-sample, to non-benchmark jurisdictions that do not robustly report hate crimes. The results imply a substantial number of unreported hate crimes, concentrated in particular jurisdictions. It also illustrates how internet search rates can be a source of data on attitudes that are otherwise hard to measure.

Tax havens have become a subject of great interest among policymakers, scholars and the general public, and are central to many important current policy debates. This chapter provides an overview of the scholarly literature on the characteristics and origins of tax havens. The earlier literature, used cross-country analysis and found evidence that tax havens tend to have stronger governance institutions than comparable nonhaven countries. The more recent literature analyzes the historical origins of tax havens and undertakes longitudinal analysis of their adoption of haven-like laws. This chapter also presents a descriptive analysis of the relationship between tax haven status and quantitative measures of countries’ historical characteristics. This descriptive analysis suggests that tax haven jurisdictions are not appreciably different from nonhavens in their historical experience of foreign rule and in other historical characteristics. This suggests some caution in attributing tax havens’ status to their colonial history or to other historical variables.

Many important provisions of US securities law—most notably, crucial elements of the Sarbanes-Oxley (SOX) legislation enacted in 2002—apply only to firms that have a public float of at least $75 million. Public float (i.e., the market value of shares held by non-insiders) is not comprehensively reported in standard databases, so I “scrape” public float data from firms’ 10-K filings for an extensive sample of reporting entities over fiscal years 1993–2015. I use a bunching approach that compares the number of observations immediately below the $75 million threshold to a smooth counterfactual density. Prior to SOX (i.e., over 1993–2002), there is no detectable bunching. Following SOX (i.e., over 2003–15), there is statistically significant evidence of bunching. However, the magnitude of bunching is relatively modest. Moreover, bunching is concentrated in the early post-SOX years (2003–09) and is virtually absent in later years (2010–15). The magnitude of bunching is not a sufficient statistic for the compliance costs of securities regulation because the costs of managing public float are unobservable. Nonetheless, the results of the bunching analysis cast some doubt on widespread claims that the regulatory burdens of these securities law provisions are large.

This paper constructs a novel measure of past foreign (or minority) rule—the genetic distance of a country's ruling elite in the year 1900 from its ethnic majority—by mapping historical information to data on bilateral genetic distances between populations. It documents robust negative conditional correlations of this “elite‐population genetic distance” with current income levels and with current fiscal capacity, controlling for an extensive set of country characteristics including existing measures of foreign rule, the genetic distance of the ethnic majority from that of the United Kingdom, continent fixed effects, and state antiquity (i.e., the history of state‐building capacity).(JELO10, N40, H20)

Current reform proposals in international and corporate tax (most notably the OECD’s GloBE proposal) envisage taxing financial statement income. This paper develops a conceptual framework – based on the literature on the elasticity of taxable income – for the welfare analysis of such proposals, and discusses the available evidence on the tax elasticity of financial statement income. The central conclusion is that the most relevant evidence (albeit with significant limitations and caveats) suggests a large responsiveness of financial statement income to taxes (and hence, arguably, a large deadweight loss). The paper also highlights the need for more evidence on this question.

Current reform proposals in international and corporate tax (most notably the OECD’s GloBE proposal) envisage taxing financial statement income. This paper develops a conceptual framework – based on the literature on the elasticity of taxable income – for the welfare analysis of such proposals, and discusses the available evidence on the tax elasticity of financial statement income. The central conclusion is that the most relevant evidence suggests a large responsiveness of financial statement income to taxes (and hence, albeit with significant limitations and caveats, arguably a large deadweight loss). The paper also highlights the need for more evidence on this question.