IDEAS home Printed from https://ideas.repec.org/p/hhs/osloec/2017_006.html
   My bibliography  Save this paper

The Firm and the self-enforcing dynamics of crime and protection

Author

Listed:

Abstract

We model the symbiotic relationship between criminals and a partnership of protection providers - the Firm. In the absence of state authority, insecurity and crime generate a demand for protection. When the protection providers themselves are recruited among criminals, the prospect of graduating to the Firm magnifies the incentive for violent crime. More violence in turn increases the income of the protection providers. The result is a violence multiplier. Combining elements from tournament and rent-seeking theory, we derive results that contrast with standard results from the rent-seeking literature. For example, a decrease in the cost of violence increases violence more than pari passu and increases the value of being a criminal. The violence multiplier also generates an incentive for the protection providers to welcome new partners into the Firm. This is a crucial premise in explaining the viability of many violent structures. We confirm empirical relevance of key elements of our framework by exploring unique data on incarcerated youth in South Africa.

Suggested Citation

  • Kløve, Eva & Mehlum, Halvor, 2017. "The Firm and the self-enforcing dynamics of crime and protection," Memorandum 06/2017, Oslo University, Department of Economics.
    • Handle: RePEc:hhs:osloec:2017_006
    as

    Download full text from publisher

    File URL: http://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2017/memo-06-2017.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Steven D. Levitt & Sudhir Alladi Venkatesh, 2000. "An Economic Analysis of a Drug-Selling Gang's Finances," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(3), pages 755-789.
    2. Stergios Skaperdas, 1996. "Contest success functions (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(2), pages 283-290.
    3. Halvor Mehlum & Karl Ove Moene & Ragnar Torvik, 2002. "Plunder & Protection Inc," Journal of Peace Research, Peace Research Institute Oslo, vol. 39(4), pages 447-459, July.
    4. Stergios Skaperdas, 2001. "The political economy of organized crime: providing protection when the state does not," Economics of Governance, Springer, vol. 2(3), pages 173-202, November.
    5. Konrad, Kai A. & Skaperdas, Stergios, 1997. "Credible threats in extortion," Journal of Economic Behavior & Organization, Elsevier, vol. 33(1), pages 23-39, May.
    6. Skaperdas, Stergios, 1992. "Cooperation, Conflict, and Power in the Absence of Property Rights," American Economic Review, American Economic Association, vol. 82(4), pages 720-739, September.
    7. Anderson, James E. & Bandiera, Oriana, 2005. "Private enforcement and social efficiency," Journal of Development Economics, Elsevier, vol. 77(2), pages 341-366, August.
    8. Avinash K. Dixit, 2007. "Economics With and Without the Law, from Lawlessness and Economics: Alternative Modes of Governance," Introductory Chapters, in: Lawlessness and Economics: Alternative Modes of Governance, Princeton University Press.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Long, Iain W., 2015. "Better feared than loved: Reputations and the motives for conflict," Journal of Economic Behavior & Organization, Elsevier, vol. 114(C), pages 46-61.
    2. Garoupa, Nuno, 2007. "Optimal law enforcement and criminal organization," Journal of Economic Behavior & Organization, Elsevier, vol. 63(3), pages 461-474, July.
    3. Konrad, Kai A., 2002. "Investment in the absence of property rights; the role of incumbency advantages," European Economic Review, Elsevier, vol. 46(8), pages 1521-1537, September.
    4. Panu Poutvaara & Mikael Priks, 2007. "Unemployment and Gang Crime: Could Prosperity Backfire?," CESifo Working Paper Series 1944, CESifo.
    5. Long, Iain W., 2013. "Recruitment to Organised Crime," Cardiff Economics Working Papers E2013/10, Cardiff University, Cardiff Business School, Economics Section.
    6. Caruso Raul, 2006. "Conflict and Conflict Management with Interdependent Instruments and Asymmetric Stakes, (The Good-Cop and the Bad-Cop Game)," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 12(1), pages 1-55, September.
    7. Leeson,Peter T., 2014. "Anarchy Unbound," Cambridge Books, Cambridge University Press, number 9781107025806.
    8. Ernesto Dal Bó & Pedro Dal Bó & Rafael Di Tella, 2007. "Reputation When Threats and Transfers Are Available," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(3), pages 577-598, September.
    9. Subhasish Chowdhury & Roman Sheremeta, 2011. "A generalized Tullock contest," Public Choice, Springer, vol. 147(3), pages 413-420, June.
    10. Warneryd, Karl, 2000. "In Defense of Lawyers: Moral Hazard as an Aid to Cooperation," Games and Economic Behavior, Elsevier, vol. 33(1), pages 145-158, October.
    11. Magnus Hoffmann & Grégoire Rota‐Graziosi, 2020. "Endogenous timing in the presence of non‐monotonicities," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(1), pages 359-402, February.
    12. Derek J. Clark & Kai A. Konrad, 2007. "Contests with Multi‐tasking," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(2), pages 303-319, June.
    13. Eduardo Zambrano, 1999. "Formal Models Of Authority," Rationality and Society, , vol. 11(2), pages 115-138, May.
    14. Pelosse, Yohan, 2011. "Inter and intra-group conflicts as a foundation for contest success functions," MPRA Paper 31468, University Library of Munich, Germany.
    15. Rachel Sabates-Wheeler & Philip Verwimp, 2014. "Extortion with Protection: Understanding the Effect of Rebel Taxation on Civilian Welfare in Burundi," Working Papers ECARES ECARES 2014-06, ULB -- Universite Libre de Bruxelles.
    16. Roth, M. Garrett & Skarbek, David, 2014. "Prison Gangs and the Community Responsibility System," Review of Behavioral Economics, now publishers, vol. 1(3), pages 223-243, May.
    17. Ethan Bueno De Mesquita & Catherine Hafer, 2008. "Public Protection Or Private Extortion?," Economics and Politics, Wiley Blackwell, vol. 20(1), pages 1-32, March.
    18. Gonzalez, Francisco M., 2007. "Effective property rights, conflict and growth," Journal of Economic Theory, Elsevier, vol. 137(1), pages 127-139, November.
    19. Johannes Münster & Klaas Staal, 2011. "War with Outsiders Makes Peace Inside," Conflict Management and Peace Science, Peace Science Society (International), vol. 28(2), pages 91-110, April.
    20. Kräkel, Matthias, 2006. "On the "Adverse Selection" of Organizations," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 168, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.

    More about this item

    Keywords

    Organized crime; violence;

    JEL classification:

    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • K00 - Law and Economics - - General - - - General (including Data Sources and Description)
    • L80 - Industrial Organization - - Industry Studies: Services - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:osloec:2017_006. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mari Strønstad Øverås (email available below). General contact details of provider: https://edirc.repec.org/data/souiono.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.