The economics of organized crime and optimal law enforcement
AbstractThis 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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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 246.
Date of creation: Sep 1997
Date of revision: Dec 1997
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Web page: http://www.econ.upf.edu/
Crime; punishment; law;
Other versions of this item:
- Garoupa, Nuno, 2000. "The Economics of Organized Crime and Optimal Law Enforcement," Economic Inquiry, Western Economic Association International, vol. 38(2), pages 278-88, April.
- K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-1998-09-14 (All new papers)
- NEP-CDM-1998-09-14 (Collective Decision-Making)
- NEP-MIC-1998-09-14 (Microeconomics)
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- 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.
- Dick, Andrew R., 1995. "When does organized crime pay? A transaction cost analysis," International Review of Law and Economics, Elsevier, vol. 15(1), pages 25-45, January.
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