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Leniency Policies and Illegal Transactions

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  • Buccirossi, Paolo
  • Spagnolo, Giancarlo

Abstract

Forthcoming in the Journal of Public Economics. We study the consequences of leniency – reduced legal sanctions for wrongdoers who spontaneously self-report to law enforcers – on sequential, bilateral, illegal transactions, such as corruption, manager-auditor collusion, or drug deals. It is known that leniency helps deterring illegal relationships sustained by repeated interaction. Here we find that - when not properly designed - leniency may simultaneously provide an effective governance mechanism for occasional sequential illegal transactions that would not be feasible in its absence.

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Bibliographic Info

Paper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 74.

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Date of creation: Sep 2005
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Handle: RePEc:trf:wpaper:74

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Related research

Keywords: amnesty; corruption; collusion; financial fraud; governance; hold up; hostages; illegal trade; immunity; law enforcement; leniency; organized crime; self-reporting; whistleblowers;

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References

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  1. Eberhard Feess & Markus Walzl, 2004. "Self-reporting in Optimal Law Enforcement when there are Criminal Teams," Economica, London School of Economics and Political Science, vol. 71(283), pages 333-348, 08.
  2. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
  3. Williamson, Oliver E, 1983. "Credible Commitments: Using Hostages to Support Exchange," American Economic Review, American Economic Association, vol. 73(4), pages 519-40, September.
  4. Buccirossi, Paolo & Spagnolo, Giancarlo, 2005. "Leniency Policies and Illegal Transactions," CEPR Discussion Papers 5442, C.E.P.R. Discussion Papers.
  5. Motta, Massimo & Polo, Michele, 2000. "Leniency Programs and Cartel Prosecution," CEPR Discussion Papers 2349, C.E.P.R. Discussion Papers.
  6. Malik Arun S., 1993. "Self-Reporting and the Design of Policies for Regulating Stochastic Pollution," Journal of Environmental Economics and Management, Elsevier, vol. 24(3), pages 241-257, May.
  7. Livernois, John & McKenna, C. J., 1999. "Truth or consequences: Enforcing pollution standards with self-reporting," Journal of Public Economics, Elsevier, vol. 71(3), pages 415-440, March.
  8. Maxim Boycko & Andrei Shleifer & Robert W. Vishny, 1993. "Privatizing Russia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2), pages 139-192.
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  10. Spagnolo, Giancarlo, 2006. "Leniency and Whistleblowers in Antitrust," CEPR Discussion Papers 5794, C.E.P.R. Discussion Papers.
  11. Joseph E. Harrington, Jr, 2005. "Optimal Corporate Leniency Programs," Economics Working Paper Archive 527, The Johns Hopkins University,Department of Economics.
  12. Joel S. Hellman & Geraint Jones & Daniel Kaufmann & Mark Schankerman, 2003. "Measuring Governance, Corruption and State Capture: How Firms and Bureaucrats Shape the Business Environment in Transition Economies," Development and Comp Systems 0308004, EconWPA.
  13. Kaplow, Louis & Shavell, Steven, 1994. "Optimal Law Enforcement with Self-Reporting of Behavior," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 583-606, June.
  14. Robert Innes, 1999. "Self-Policing and Optimal Law Enforcement When Violator Remediation is Valuable," Journal of Political Economy, University of Chicago Press, vol. 107(6), pages 1305-1325, December.
  15. Simon Johnson & John McMillan & Christopher Woodruff, 1999. "Property Rights, Finance, and Entrepreneurship," CESifo Working Paper Series 212, CESifo Group Munich.
  16. Robin Boadway & Nicolas Marceau & Steeve Mongrain, 2002. "Joint tax evasion," Canadian Journal of Economics, Canadian Economics Association, vol. 35(3), pages 417-435, August.
  17. A. Mitchell Polinsky & Steven Shavell, 1999. "The Economic Theory of Public Enforcement of Law," NBER Working Papers 6993, National Bureau of Economic Research, Inc.
  18. Mookherjee, Dilip & Png, I P L, 1995. "Corruptible Law Enforcers: How Should They Be Compensated?," Economic Journal, Royal Economic Society, vol. 105(428), pages 145-59, January.
  19. Innes, Robert, 2000. "Self-Reporting in Optimal Law Enforcement When Violators Have Heterogeneous Probabilities of Apprehension," The Journal of Legal Studies, University of Chicago Press, vol. 29(1), pages 287-300, January.
  20. Innes, Robert, 1999. "Remediation and self-reporting in optimal law enforcement," Journal of Public Economics, Elsevier, vol. 72(3), pages 379-393, June.
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  22. Innes, Robert, 2001. "Violator Avoidance Activities and Self-Reporting in Optimal Law Enforcement," Journal of Law, Economics and Organization, Oxford University Press, vol. 17(1), pages 239-56, April.
  23. Spagnolo, Giancarlo, 2004. "Divide et Impera: Optimal Leniency Programmes," CEPR Discussion Papers 4840, C.E.P.R. Discussion Papers.
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Citations

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Cited by:
  1. Frédéric Boehm & Johann Graf Lambsdorff, 2009. "Corrupción y anticorrupción: una perspectiva neo-institucional," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 11(21), pages 45-72, July-Dece.
  2. Agisilaou, Panayiotis, 2012. "Keep to sustain or keep to exploit? Why firms keep hard evidence," MPRA Paper 39109, University Library of Munich, Germany.
  3. Agisilaou, Panayiotis, 2011. "Keep to sustain or keep to exploit? Why firms keep hard evidence," MPRA Paper 30963, University Library of Munich, Germany.
  4. Berentsen, Aleksander & Bruegger, Esther & Loertscher, Simon, 2008. "On cheating, doping and whistleblowing," European Journal of Political Economy, Elsevier, vol. 24(2), pages 415-436, June.
  5. Christoph Engel & Sebastian Goerg & Gaoneng Yu, 2012. "Symmetric vs. Asymmetric Punishment Regimes for Bribery," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2012_01, Max Planck Institute for Research on Collective Goods, revised May 2013.
  6. Dufwenberg, Martin & Spagnolo, Giancarlo, 2012. "Legalizing Bribe Giving," CEPR Discussion Papers 9236, C.E.P.R. Discussion Papers.
  7. Paolo Pinotti, 2012. "The Economic Costs of Organized Crime: Evidence from Southern Italy," Working Papers 054, "Carlo F. Dondena" Centre for Research on Social Dynamics (DONDENA), Università Commerciale Luigi Bocconi.
  8. Lin, Shi-Woei, 2010. "Self-reporting mechanism for risk regulation," Journal of Business Research, Elsevier, vol. 63(5), pages 528-534, May.
  9. Buccirossi, Paolo & Spagnolo, Giancarlo, 2006. "Leniency policies and illegal transactions," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1281-1297, August.
  10. Bj�rn Frank & Johann Graf Lambsdorff & Fr�d�ric Boehm, 2011. "Gender and Corruption: Lessons from Laboratory Corruption Experiments," The European Journal of Development Research, Palgrave Macmillan, vol. 23(1), pages 59-71, February.
  11. Bigoni, Maria & Fridolfsson, Sven-Olof & Le Coq, Chloe & Spagnolo, Giancarlo, 2008. "Fines, Leniency, Rewards and Organized Crime: Evidence from Antitrust Experiments," Working Paper Series in Economics and Finance 698, Stockholm School of Economics.
  12. Jay Pil Choi & Heiko Gerlach, 2009. "International Antitrust Enforcement and Multi-Market Contact," CESifo Working Paper Series 2599, CESifo Group Munich.
  13. Martin Dufwenberg & Giancarlo Spagnolo, 2014. "Legalizing Bribe Giving," Working Papers 515, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  14. Graf Lambsdorff, Johann, 2010. "Deterrence and constrained enforcement: Alternative regimes to deal with bribery," Passauer Diskussionspapiere, Volkswirtschaftliche Reihe V-60-10, University of Passau, Faculty of Business and Economics.
  15. Park, Sangwon, 2014. "The effect of leniency programs on endogenous collusion," Economics Letters, Elsevier, vol. 122(2), pages 326-330.

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