This chapter of the forthcoming Handbook of Law and Economics surveys the theory of the public enforcement of law %u2013 the use of governmental agents (regulators, inspectors, tax auditors, police, prosecutors) to detect and to sanction violators of legal rules. The theoretical core of our analysis addresses the following basic questions: Should the form of the sanction imposed on a liable party be a fine, an imprisonment term, or a combination of the two? Should the rule of liability be strict or fault-based? If violators are caught only with a probability, how should the level of the sanction be adjusted? How much of society%u2019s resources should be devoted to apprehending violators? We then examine a variety of extensions of the central theory, including: activity level; errors; the costs of imposing fines; general enforcement; marginal deterrence; the principal-agent relationship; settlements; self-reporting; repeat offenders; imperfect knowledge about the probability and magnitude of sanctions; corruption; incapacitation; costly observation of wealth; social norms; and the fairness of sanctions.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
11780.
Length: Date of creation: Nov 2005 Date of revision: Handle: RePEc:nbr:nberwo:11780
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Find related papers by JEL classification: D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights D62 - Microeconomics - - Welfare Economics - - - Externalities D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion K14 - Law and Economics - - Basic Areas of Law - - - Criminal Law K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
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James Andreoni & Brian Erard & Jonathan Feinstein, 1998.
"Tax Compliance,"
Journal of Economic Literature,
American Economic Association, vol. 36(2), pages 818-860, June.
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