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Optimal magnitude and probability of fines

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  • Nuno Garoupa

Abstract

The economic literature on crime and punishment focuses on the trade-off between probability and severity of punishment, and suggests that detection probability and fines are substitutes. In this paper it is shown that, in presence of substantial underdeterrence caused by costly detection and punishment, these instruments may become complements. When offenders are poor, the deterrent value of monetary sanctions is low. Thus, the government does not invest a lot in detection. If offenders are rich, however, the deterrent value of monetary sanctions is high, so it is more profitable to prosecute them.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 454.

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Date of creation: Apr 2000
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Handle: RePEc:upf:upfgen:454

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

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Keywords: Crime; probability and severity of sanctions; law enforcement;

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  1. A. Mitchell Polinsky & Steven Shavell, 1990. "A Note on Optimal Fines When Wealth Varies Among Individuals," NBER Working Papers 3232, National Bureau of Economic Research, Inc.
  2. Steven Shavell & A. Mitchell Polinsky, 2000. "The Economic Theory of Public Enforcement of Law," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 45-76, March.
  3. Lewin, Jeff L. & Trumbull, William N., 1990. "The social value of crime?," International Review of Law and Economics, Elsevier, vol. 10(3), pages 271-284, December.
  4. Louis Kaplow, 1989. "The Optimal Probability and Magnitude of Fines for Acts that Definitely are Undesirable," NBER Working Papers 3008, National Bureau of Economic Research, Inc.
  5. A. Mitchell Polinsky & Steven Shavell, 1990. "Enforcement Costs and the Optimal Magnitude and Probability of Fines," NBER Working Papers 3429, National Bureau of Economic Research, Inc.
  6. Polinsky, A. Mitchell & Shavell, Steven, 1984. "The optimal use of fines and imprisonment," Journal of Public Economics, Elsevier, vol. 24(1), pages 89-99, June.
  7. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169.
  8. Shavell, Steven, 1993. "The Optimal Structure of Law Enforcement," Journal of Law and Economics, University of Chicago Press, vol. 36(1), pages 255-87, April.
  9. Garoupa, Nuno, 1997. " The Theory of Optimal Law Enforcement," Journal of Economic Surveys, Wiley Blackwell, vol. 11(3), pages 267-95, September.
  10. Shavell, Steven, 1987. "The Optimal Use of Nonmonetary Sanctions as a Deterrent," American Economic Review, American Economic Association, vol. 77(4), pages 584-92, September.
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