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The Effects of Leniency on Illegal Transactions: How (Not) to Fight Corruption

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Author Info

  • Buccirossi, Paolo

    ()
    (Lear - Laboratory of Economics, Antitrust and Regulation)

  • Spagnolo, Giancarlo

    ()
    (Stockholm School of Economics, University of Mannheim and CEPR)

Abstract

We study the consequences of 'leniency' - reduced legal sanctions for wrongdoers who spontaneously self-report to law enforcers - on corruption, drug dealing, and other forms of sequential, bilateral, illegal trade. We find that when not properly designed, leniency may be highly counterproductive. In reality leniency is typically "moderate," in the sense of only reducing, or at best cancelling the sanctions for the self-reporting party. Moderate leniency may greatly facilitate the enforcement of long-term illegal trade relations, and may even provide an effective enforcement mechanism for occasional (one-shot) illegal transactions, which would not be enforceable otherwise.

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File URL: http://swopec.hhs.se/hastef/papers/hastef0456.pdf
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Bibliographic Info

Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 456.

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Length: 31 pages
Date of creation: 31 Jul 2001
Date of revision:
Handle: RePEc:hhs:hastef:0456

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Related research

Keywords: Law enforcement; Self-reporting; Corruption; Crime; Illegal trade; Drug dealing.;

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Cited by:
  1. Spagnolo, Giancarlo, 2002. "Globalization and Cooperative Relations," CEPR Discussion Papers 3522, C.E.P.R. Discussion Papers.

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