Is There an Informative Effect of Law? An Experimental Test

Debates on how the law affects citizens' behaviour have traditionally focused on two mechanisms: deterrence and perceptions of legitimacy. In recent years, some scholars have suggested that the law may also affect compliance through expressive mechanisms that reveal information about the world (for example, by eliciting the risks associated with a particular behaviour). Dharmapala and McAdams have called this the informative effect of law. However, to date very little empirical evidence of the existence of such an effect has emerged. In this article, we present the results of an experiment that tests for three different hypotheses as to how this effect may be produced. Our findings show that legislators' sincerity or their access to expert knowledge is not sufficient to produce information effects. Instead, we suggest an ‘asymmetry’ hypothesis: the fact that a law is passed or rejected has an asymmetrical information effect on subjects' risk perceptions.     

Can corruption constrain the size of governments?

This paper analyzes the relationship between government size and the level of corruption. We propose a theoretical model where production decisions and corrupt behavior are endogenously determined. We model corruption assuming production in the formal sector is regulated by public officials who can use their public power for private gain. In this context, the underground economy emerges as an outside option that allows entrepreneurs to avoid dealing with bureaucrats. The fact that investments in the informal sector may influence public finances, introduces the possibility of multiple equilibria with different levels of corruption. Consistent with previous theoretical works and recent empirical evidence, we find out that corruption and the shadow economy are complements as they positively correlate across equilibria, which implies that corruption may limit the size of the public sector.