Norm Flexibility and Private Initiative
AbstractWe model an enforcement problem where firms can take a known and lawful action or seek a profitable innovation that may enhance or reduce welfare. The legislator sets fines calibrated to the harmfulness of unlawful actions. The range of fines defines norm flexibility. Expected sanctions guide firms’ choices among unlawful actions (marginal deterrence) and/or stunt their initiative altogether (average deterrence). With loyal enforcers, maximum norm flexibility is optimal, so as to exploit both marginal and average deterrence. With corrupt enforcers, instead, the legislator should prefer more rigid norms that prevent bribery and misreporting, at the cost of reducing marginal deterrence and stunting private initiative. The greater is potential corruption, the more rigid the optimal norms.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 163.
Date of creation: 01 Sep 2006
Date of revision: 01 Nov 2006
norm design; initiative; enforcement; corruption;
Other versions of this item:
- D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
- K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Banerjee, Abhijit V, 1997. "A Theory of Misgovernance," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1289-1332, November.
- Philippe Aghion & Jean Tirole, 1994.
"Normal and Real Authority in Organizations,"
94-13, Massachusetts Institute of Technology (MIT), Department of Economics.
- Philippe Aghion & Jean Tirole, 1994. "Formal and Real Authority in Organizations," Working papers 95-8, Massachusetts Institute of Technology (MIT), Department of Economics.
- Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Scholarly Articles 4554125, Harvard University Department of Economics.
- Aghion, Philippe & Tirole, Jean, 1994. "Formal and Real Authority in Organizations," IDEI Working Papers 37, Institut d'Économie Industrielle (IDEI), Toulouse.
- Giovanni Immordino & Marco Pagano, 2009.
"Legal Standards, Enforcement and Corruption,"
EIEF Working Papers Series
0914, Einaudi Institute for Economics and Finance (EIEF), revised Oct 2009.
- Immordino, Giovanni & Pagano, Marco, 2008. "Legal Standards, Enforcement and Corruption," CEPR Discussion Papers 7071, C.E.P.R. Discussion Papers.
- Giovanni Immordino & Marco Pagano, 2003. "Legal Standards, Enforcement and Corruption," CSEF Working Papers 98, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 Oct 2009.
- Mookherjee, Dilip & Png, I P L, 1994. "Marginal Deterrence in Enforcement of Law," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 1039-66, October.
- Edward L. Glaeser & Andrei Shleifer, 2001.
"The Rise of the Regulatory State,"
NBER Working Papers
8650, National Bureau of Economic Research, Inc.
- Edward L. Glaeser & Andrei Shleifer, 2001. "The Rise of the Regulatory State," Harvard Institute of Economic Research Working Papers 1934, Harvard - Institute of Economic Research.
- Gary S. Becker, 1968.
"Crime and Punishment: An Economic Approach,"
Journal of Political Economy,
University of Chicago Press, vol. 76, pages 169.
- Tirole, Jean, 1986. "Hierarchies and Bureaucracies: On the Role of Collusion in Organizations," Journal of Law, Economics and Organization, Oxford University Press, vol. 2(2), pages 181-214, Fall.
- Polinsky, A. Mitchell & Shavell, Steven, 2001.
"Corruption and optimal law enforcement,"
Journal of Public Economics,
Elsevier, vol. 81(1), pages 1-24, July.
- Banerjee, A.V., 1997. "A Theory of Misgovernance," Working papers 97-4, Massachusetts Institute of Technology (MIT), Department of Economics.
- Acemoglu, D. & Verdier, T., 1997.
"The Choice between Market Failures and Corruption,"
DELTA Working Papers
97-06, DELTA (Ecole normale supérieure).
- Jordi Gual & Anne Perrot & Michele Polo & Patrick Rey & Klaus Schmidt & Rune Stenbacka, 2006.
"An Economic Approach to Article 82,"
Competition Policy International, vol. 2.
- George J. Stigler, 1974.
"The Optimum Enforcement of Laws,"
in: Essays in the Economics of Crime and Punishment, pages 55-67
National Bureau of Economic Research, Inc.
- Shavell, Steven, 1992. "A note on marginal deterrence," International Review of Law and Economics, Elsevier, vol. 12(3), pages 345-355, September.
- Gary S. Becker & George J. Stigler, 1974. "Law Enforcement, Malfeasance, and Compensation of Enforcers," The Journal of Legal Studies, University of Chicago Press, vol. 3(1), pages 1-18, January.
- Shavell, Steven, 1993. "The Optimal Structure of Law Enforcement," Journal of Law and Economics, University of Chicago Press, vol. 36(1), pages 255-87, April.
- Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
- Leonardo Felli & Giovanni Immordino & Alessandro Riboni & Luca Anderlini, 2008. "Legal Origins and Creative Destruction," 2008 Meeting Papers 733, Society for Economic Dynamics.
- Giovanni Immordino & Michele Polo, 2008. "Judicial Errors, Legal Standards and Innovative Activity," CSEF Working Papers 196, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 04 Jun 2010.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lia Ambrosio).
If references are entirely missing, you can add them using this form.