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Optimal law enforcement with costly public funds

  • Rouillon, Sébastien

In this paper, we amend the standard model of law enforcement, by introducing a marginal cost of public funds. We derive the associated optimal enforcement policy. We show that, as the marginal cost of public funds increases, the objective of raising public funds gradually replaces that of deterring harmful activity and that the optimal policy varies accordingly. In particular, we prove that, when the harm caused by the illegal activity is sufficiently small, some overdeterrence will be optimal for sufficiently large marginal cost of public funds.

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File URL: http://www.sciencedirect.com/science/article/B6V7M-516M761-1/2/d5cf3747c0afa962cdad47c78e94b296
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Article provided by Elsevier in its journal International Review of Law and Economics.

Volume (Year): 30 (2010)
Issue (Month): 4 (December)
Pages: 345-348

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Handle: RePEc:eee:irlaec:v:30:y:2010:i:4:p:345-348
Contact details of provider: Web page: http://www.elsevier.com/locate/irle

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  1. 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.
  2. Mickael BEAUD, 2008. "Le coût social marginal des fonds publics en France," Annales d'Economie et de Statistique, ENSAE, issue 90, pages 215-232.
  3. Besanko, D. & Spulber, D.F., 1988. "Delegated Law Enforcement And Noncooperative Behavior," Papers m8820, Southern California - Department of Economics.
  4. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 1-54 National Bureau of Economic Research, Inc.
  5. Nuno Garoupa & Mohamed Jellal, 2002. "A Note on Optimal Law Enforcement under Asymmetric Information," European Journal of Law and Economics, Springer, vol. 14(1), pages 5-13, July.
  6. Stuart, Charles E, 1984. "Welfare Costs per Dollar of Additional Tax Revenue in the United States," American Economic Review, American Economic Association, vol. 74(3), pages 352-62, June.
  7. Nuno Garoupa, 2000. "Optimal magnitude and probability of fines," Economics Working Papers 454, Department of Economics and Business, Universitat Pompeu Fabra.
  8. Browning, Edgar K, 1987. "On the Marginal Welfare Cost of Taxation," American Economic Review, American Economic Association, vol. 77(1), pages 11-23, March.
  9. Ballard, Charles L & Shoven, John B & Whalley, John, 1985. "General Equilibrium Computations of the Marginal Welfare Costs of Taxes in the United States," American Economic Review, American Economic Association, vol. 75(1), pages 128-38, March.
  10. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, June.
  11. Nuno Garoupa & Daniel Klerman, 2002. "Optimal Law Enforcement with a Rent-Seeking Government," American Law and Economics Review, Oxford University Press, vol. 4(1), pages 116-140, January.
  12. Mayshar, Joram, 1991. "On Measuring the Marginal Cost of Funds Analytically," American Economic Review, American Economic Association, vol. 81(5), pages 1329-35, December.
  13. Snow, Arthur & Warren, Ronald Jr., 1996. "The marginal welfare cost of public funds: Theory and estimates," Journal of Public Economics, Elsevier, vol. 61(2), pages 289-305, August.
  14. A. Mitchell Polinsky & Steven Shavell, 1999. "The Economic Theory of Public Enforcement of Law," NBER Working Papers 6993, National Bureau of Economic Research, Inc.
  15. Browning, Edgar K, 1976. "The Marginal Cost of Public Funds," Journal of Political Economy, University of Chicago Press, vol. 84(2), pages 283-98, April.
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