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Too much or not enough crimes? On the ambiguous effects of repression

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Author Info
Langlais, Eric

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Abstract

The purpose of this paper is to investigate the optimal enforcement of the penal code when criminals invest in a specific class of avoidance activities termed dissembling activities (i.e. self-protection efforts undertaken by criminals to hedge their illegal gains in case of detection and arrestation). We show that the penal law has two screening effects: it separates the population of potential criminals between those who commit the crime and those who do not, and in the former group, between those who undertake dissembling efforts and those who do not. Then, we show that it is never optimal to use less than the maximal fine in contrast to what may occur with avoidance detection (i.e. efforts undertaken in order to reduce the probability of arrestation: Malik (1990)); and furthermore, that the optimal penal code may imply overdeterrence. Finally, we show that any reform of the penal code has ambiguous effects when criminals undertake dissembling activities which are a by-product of illegal activities, since increasing the maximum possible fine may increase or decrease the number of crimes committed and may increase or decrease the proportion of illegal gains hedged by criminals.

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File URL: http://mpra.ub.uni-muenchen.de/1575/
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1575.

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Date of creation: 12 Jan 2007
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Handle: RePEc:pra:mprapa:1575

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Related research
Keywords: deterrence avoidance detection dissembling activities optimal enforcement of law.

Find related papers by JEL classification:
D62 - Microeconomics - - Welfare Economics - - - Externalities
K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General
D60 - Microeconomics - - Welfare Economics - - - General

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References listed on IDEAS
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  1. Garoupa, Nuno, 2001. "Optimal magnitude and probability of fines," European Economic Review, Elsevier, vol. 45(9), pages 1765-1771, October. [Downloadable!] (restricted)
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  2. A. Mitchell Polinsky & Steven Shavell, 2000. "The Economic Theory of Public Enforcement of Law," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 45-76, March. [Downloadable!] (restricted)
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  3. Bebchuk, Lucian Arye & Kaplow, Louis, 1993. "Optimal sanctions and differences in individuals' likelihood of avoiding detection," International Review of Law and Economics, Elsevier, vol. 13(2), pages 217-224, June. [Downloadable!] (restricted)
  4. A. Mitchell Polinsky & Steven Shavell, 1991. "A Note on Optimal Fines When Wealth Varies Among Individuals," NBER Working Papers 3232, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Garoupa, Nuno, 1997. " The Theory of Optimal Law Enforcement," Journal of Economic Surveys, Blackwell Publishing, vol. 11(3), pages 267-95, September. [Downloadable!] (restricted)
  6. 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)
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