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Legal Standards, Enforcement and Corruption

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Abstract

Stricter laws require more incisive and costlier enforcement. Since enforcement activity depends both on available tax revenue and the honesty of officials, the optimal legal standard of a benevolent government is increasing in per-capita income and decreasing in officials’ corruption. In contrast to the “tollbooth view” of regulation, the standard chosen by a self-interested government is a non-monotonic function of officials’ corruption, and can be either lower or higher than that chosen by a benevolent regulator. International evidence on environmental regulation show that standards correlate positively with percapita income, and negatively with corruption, consistently with the model’s predictions for benevolent governments.

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Bibliographic Info

Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 98.

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Date of creation: 01 Jun 2003
Date of revision: 01 Oct 2009
Publication status: Published in the Journal of the European Economic Association, Vol. 8, No. 5, September 2010.
Handle: RePEc:sef:csefwp:98

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Keywords: legal standards; enforcement; corruption;

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Cited by:
  1. Immordino, Giovanni & Pagano, Marco & Polo, Michele, 2009. "Incentives to Innovate and Social Harm: Laissez-Faire, Authorization or Penalties?," CEPR Discussion Papers 7280, C.E.P.R. Discussion Papers.
  2. Marco Pagano & Giovanni Immordino, 2007. "Optimal Regulation of Auditing," CESifo Working Paper Series 1980, CESifo Group Munich.
  3. Hui Tong & Shang-Jin Wei, 2011. "Does Trade Globalization Induce or Inhibit Corporate Transparency? Unbundling the Growth Potential and Product Market Competition Channels," NBER Working Papers 17631, National Bureau of Economic Research, Inc.
  4. Berglof, Erik & Claessens, Stijn, 2004. "Enforcement and Corporate Governance," Policy Research Working Paper Series 3409, The World Bank.
  5. Giovanni Immordino & Marco Pagano & Michele Polo, 2006. "Norm Flexibility and Private Initiative," CSEF Working Papers 163, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 Nov 2006.
  6. Stephen Millard & Matthew Willison, 2006. "The welfare benefits of stable and efficient payment systems," Bank of England working papers 301, Bank of England.
  7. Giovanni Facchini & Cecilia Testa, 2010. "The rhetoric of closed borders: quotas, lax enforcement and illegal migration," Norface Discussion Paper Series 2010001, Norface Research Programme on Migration, Department of Economics, University College London.
  8. Harilaos Mertzanis, 2011. "The effectiveness of corporate governance policy in Greece," Journal of Financial Regulation and Compliance, Emerald Group Publishing, vol. 19(3), pages 222-243, July.

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