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Organized Crime, Corruption and Punishment

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Author Info
Kugler, Maurice
Verdier, Thierry
Zenou, Yves

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Abstract

We analyse an oligopoly model in which differentiated criminal organizations compete on criminal activities and engage in corruption to avoid punishment. When law enforcers are sufficiently well-paid, difficult to bribe and corruption detection highly probable, we show that increasing policing or sanctions effectively deters crime. When bribing costs are low - that is badly-paid and dishonest law enforcers working in a weak governance environment - and the rents from criminal activity relative to legal activity are sufficiently high, we find that increasing policing and sanctions can generate higher crime rates. In particular, the relationship between the traditional instruments of deterrence, namely intensification of policing and increment of sanctions, and crime is non-monotonic. Beyond a threshold, increases in expected punishment induce organized crime to corruption, and ensuing impunity leads to higher rather than lower crime.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3806.

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Date of creation: Feb 2003
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Handle: RePEc:cpr:ceprdp:3806

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Related research
Keywords: corruption; deterrence; oligopoly; organized crime; strategic complements;

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Find related papers by JEL classification:
K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Fender, John, 1999. "A general equilibrium model of crime and punishment," Journal of Economic Behavior & Organization, Elsevier, vol. 39(4), pages 437-453, July. [Downloadable!] (restricted)
  2. A. Mitchell Polinsky & Steven Shavell, 1999. "The Economic Theory of Public Enforcement of Law," NBER Working Papers 6993, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring. [Downloadable!] (restricted)
  4. Marjit, Sugata & Shi, Heling, 1998. "On controlling crime with corrupt officials," Journal of Economic Behavior & Organization, Elsevier, vol. 34(1), pages 163-172, January. [Downloadable!] (restricted)
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  8. Kugler, M. & Rosenthal, H., 2000. "Checks and Balances: An Assessment of the Institutional Separation of Political Powers in Colombia," Discussion Paper Series In Economics And Econometrics 0018, Economics Division, School of Social Sciences, University of Southampton.
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  9. Polinsky, A. Mitchell & Shavell, Steven, 2001. "Corruption and optimal law enforcement," Journal of Public Economics, Elsevier, vol. 81(1), pages 1-24, July. [Downloadable!] (restricted)
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  10. Arun S. Malik, 1990. "Avoidance, Screening and Optimum Enforcement," RAND Journal of Economics, The RAND Corporation, vol. 21(3), pages 341-353, Autumn. [Downloadable!] (restricted)
  11. Chang, Juin-jen & Lai, Ching-chong & Yang, C. C., 2000. "Casual police corruption and the economics of crime:: Further results," International Review of Law and Economics, Elsevier, vol. 20(1), pages 35-51, March. [Downloadable!] (restricted)
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  16. Kugler, Maurice & Verdier, Thierry & Zenou, Yves, 2003. "Organized Crime, Corruption and Punishment," Working Paper Series 600, Research Institute of Industrial Economics. [Downloadable!]
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  17. Garoupa, Nuno, 2000. "The Economics of Organized Crime and Optimal Law Enforcement," Economic Inquiry, Oxford University Press, vol. 38(2), pages 278-88, April.
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  18. Besley, Timothy & McLaren, John, 1993. "Taxes and Bribery: The Role of Wage Incentives," Economic Journal, Royal Economic Society, vol. 103(416), pages 119-41, January. [Downloadable!] (restricted)
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  20. Polinsky, Mitchell & Shavell, Steven, 1979. "The Optimal Tradeoff between the Probability and Magnitude of Fines," American Economic Review, American Economic Association, vol. 69(5), pages 880-91, December. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ethan Bueno De Mesquita & Catherine Hafer, 2008. "Public Protection Or Private Extortion?," Economics and Politics, Blackwell Publishing, vol. 20(1), pages 1-32, 03. [Downloadable!] (restricted)
  2. Svetlana Andrianova & Nicolas Melissas, 2006. "Corruption, Extortion, and the Boundaries of the Law," Working Papers 0605, Centro de Investigacion Economica, ITAM. [Downloadable!]
    Other versions:
  3. Paolo Buonanno & Daniel Montolio & Paolo Vanin, 2006. "Does Social Capital Reduce Crime?," "Marco Fanno" Working Papers 0029, Dipartimento di Scienze Economiche "Marco Fanno". [Downloadable!]
    Other versions:
  4. Pedro H. Albuquerque, 2005. "Shared Legacies, Disparate Outcomes: Why American South Border Cities Turned the Tables on Crime and Their Mexican Sisters Did Not," Law and Economics 0511002, EconWPA. [Downloadable!]
  5. Hakkala, Katariina & Norbäck, Pehr-Johan & Svaleryd, Helena, 2005. "Asymmetric Effects of Corruption on FDI: Evidence from Swedish Multinational Firms," Working Paper Series 641, Research Institute of Industrial Economics, revised 20 Aug 2007. [Downloadable!]
    Other versions:
  6. Pääkkönen, Jenni, 2009. "Optimal Law Enforcement and Welfare in the Presence of Organized Crime," BOFIT Discussion Papers 30/2008, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
  7. Kugler, Maurice & Verdier, Thierry & Zenou, Yves, 2004. "Organised Crime, Corruption and Punishment," Discussion Paper Series In Economics And Econometrics 0407, Economics Division, School of Social Sciences, University of Southampton. [Downloadable!]
    Other versions:
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