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The economics of organized crime and optimal law enforcement

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  • Nuno Garoupa

Abstract

This paper extends the optimal law enforcement literature to organized crime. We model the criminal organization as a vertical structure where the principal extracts some rents from the agents through extortion. Depending on the principal's information set, threats may or may not be credible. As long as threats are credible, the principal is able to fully extract rents. In that case, the results obtained by applying standard theory of optimal law enforcement are robust: we argue for a tougher policy. However, when threats are not credible, the principal is not able to fully extract rents and there is violence. Moreover, we show that it is not necessarily true that a tougher law enforcement policy should be chosen when in presence of organized crime.

Suggested Citation

  • Nuno Garoupa, 1997. "The economics of organized crime and optimal law enforcement," Economics Working Papers 246, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 1997.
    • Handle: RePEc:upf:upfgen:246
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    More about this item

    Keywords

    Crime; punishment; law;
    All these keywords.

    JEL classification:

    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior

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