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Organized Crime, Corruption and Punishment

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  • Maurice Kugler
  • Thierry Verdier
  • Yves Zenou

Abstract

We analyze an oligopoly model in which differentiated criminal organizations globally compete on criminal activities and engage in local 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. However, when bribing costs are low, that is badly-paid and dishonest law enforcers work 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 nonmonotonic. 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 DELTA (Ecole normale supérieure) in its series DELTA Working Papers with number 2003-34.

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Date of creation: 2003
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Handle: RePEc:del:abcdef:2003-34

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References

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Citations

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Cited by:
  1. Pääkkönen, Jenni, 2008. "Optimal Law Enforcement and Welfare in the Presence of Organized Crime," BOFIT Discussion Papers 30/2008, Bank of Finland, Institute for Economies in Transition.
  2. Stéphane Straub, 2009. "Regulatory Intervention, Corruption and Competition," Review of Industrial Organization, Springer, Springer, vol. 35(1), pages 123-148, September.
  3. Caruso, Raul & Baronchelli, Adelaide, 2013. "Economic Aspects of the complementarity between Corruption and Crime: Evidence from Italy in the period 1996-2005," MPRA Paper 49845, University Library of Munich, Germany.
  4. Ethan Bueno De Mesquita & Catherine Hafer, 2008. "Public Protection Or Private Extortion?," Economics and Politics, Wiley Blackwell, Wiley Blackwell, vol. 20(1), pages 1-32, 03.
  5. Maurice Kugler & Thierry Verdier & Yves Zenou, 2003. "Organized Crime, Corruption and Punishment," DELTA Working Papers, DELTA (Ecole normale supérieure) 2003-34, DELTA (Ecole normale supérieure).
  6. Katariina Nilsson Hakkala & Pehr-Johan Norbäck & Helena Svaleryd, 2008. "Asymmetric Effects of Corruption on FDI: Evidence from Swedish Multinational Firms," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 627-642, November.
  7. Ilaria Petrarca & Roberto Ricciuti, 2013. "The Historical Roots of Corruption and Economic Development in Italy," CESifo Working Paper Series 4212, CESifo Group Munich.
  8. Svetlana Andrianova & Nicolas Melissas, 2006. "Corruption, Extortion, and the Boundaries of the Law," Working Papers, Centro de Investigacion Economica, ITAM 0605, Centro de Investigacion Economica, ITAM.
  9. Paolo Buonanno & Daniel Montolio & Paolo Vanin, 2006. "Does Social Capital Reduce Crime?," Working Papers, University of Bergamo, Department of Economics 0605, University of Bergamo, Department of Economics.
  10. Salvatore Piccolo & Giovanni Immordino, 2012. "Optimal Accomplice-Witnesses Regulation under Asymmetric Information," CSEF Working Papers, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy 304, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  11. Graf Lambsdorff, Johann, 2010. "Deterrence and constrained enforcement: Alternative regimes to deal with bribery," Passauer Diskussionspapiere, Volkswirtschaftliche Reihe V-60-10, University of Passau, Faculty of Business and Economics.
  12. DeAngelo, Gregory, 2012. "Making space for crime: A spatial analysis of criminal competition," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 42-51.
  13. Celik, Gorkem & Sayan, Serdar, 2005. "To Give In or Not To Give In To Bribery? Setting the Optimal Fines for Violations of Rules when the Enforcers are Likely to Ask for Bribes," Microeconomics.ca working papers, Vancouver School of Economics celik-05-08-03-12-50-26, Vancouver School of Economics, revised 06 Aug 2008.
  14. 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, EconWPA 0511002, EconWPA.

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