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The Economics of Organized Crime and Optimal Law Enforcement

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Author Info
Nuno Garoupa

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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.

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Publisher Info
Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 246.

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Date of creation: Sep 1997
Date of revision: Dec 1997
Handle: RePEc:upf:upfgen:246

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Web page: http://www.econ.upf.edu/

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Related research
Keywords: Crime; punishment; law;

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Find related papers by JEL classification:
K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior

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References listed on IDEAS
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.:
  1. Polinsky, A Mitchell & Shavell, Steven, 1992. "Enforcement Costs and the Optimal Magnitude and Probability of Fines," Journal of Law & Economics, University of Chicago Press, vol. 35(1), pages 133-48, April.
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  2. 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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  3. Garoupa, Nuno, 1997. " The Theory of Optimal Law Enforcement," Journal of Economic Surveys, Blackwell Publishing, vol. 11(3), pages 267-95, September. [Downloadable!] (restricted)
  4. Ehrlich, Isaac, 1996. "Crime, Punishment, and the Market for Offenses," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 43-67, Winter. [Downloadable!] (restricted)
  5. Konrad, Kai A. & Skaperdas, Stergios, 1997. "Credible threats in extortion," Journal of Economic Behavior & Organization, Elsevier, vol. 33(1), pages 23-39, May. [Downloadable!] (restricted)
  6. Skaperdas, S. & Syropoulos, C., 1993. "Gangs as Primitive States," Papers 92-93-13, California Irvine - School of Social Sciences.
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  7. 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)
  8. Polinsky, Mitchell & Shavell, Steven, 1979. "The Optimal Tradeoff between the Probability and Magnitude of Fines," American Economic Review, American Economic Association, vol. 69(5), pages 880-91, December. [Downloadable!] (restricted)
  9. Shavell, Steven, 1987. "A Model of Optimal Incapacitation," American Economic Review, American Economic Association, vol. 77(2), pages 107-10, May.
  10. Bowles, Roger & Garoupa, Nuno, 1997. "Casual police corruption and the economics of crime," International Review of Law and Economics, Elsevier, vol. 17(1), pages 75-87, March. [Downloadable!] (restricted)
  11. Grossman, Herschel I, 1991. "A General Equilibrium Model of Insurrections," American Economic Review, American Economic Association, vol. 81(4), pages 912-21, September. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Langlais, Eric, 2008. "Deterrence of a criminal team: how to rely on its members' shortcomings?," MPRA Paper 14369, University Library of Munich, Germany. [Downloadable!]
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  2. Giancarlo Spagnolo, 2004. "Divide et Impera. Optimnal Deterrence Mechanisms Against Cartels and Organized Crime," Econometric Society 2004 North American Winter Meetings 485, Econometric Society. [Downloadable!]
  3. Hauret, Laetitia & Langlais, Eric & Sonntag, Carine, 2009. "On the deterrent effect of individual versus collective liability in criminal organizations," MPRA Paper 14762, University Library of Munich, Germany. [Downloadable!]
  4. Maurice Kugler & Thierry Verdier & Yves Zenou, 2003. "Organized Crime, Corruption and Punishment," DELTA Working Papers 2003-34, DELTA (Ecole normale supérieure). [Downloadable!]
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  5. Alfredo Burlando & Alberto Motta, 2007. "Self Reporting reduces corruption in law enforcement," "Marco Fanno" Working Papers 0063, Dipartimento di Scienze Economiche "Marco Fanno". [Downloadable!]
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  6. Abdalla Mansour & Nicolas Marceau & Steeve Mongrain, 2001. "Gangs and Crime Deterrence," Cahiers de recherche CREFE / CREFE Working Papers 138, CREFE, Université du Québec à Montréal. [Downloadable!]
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