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Leniency policies and illegal transactions

  • Buccirossi, Paolo
  • Spagnolo, Giancarlo

We study the consequences of leniency - reduced legal sanctions for wrongdoers who spontaneously self-report to law enforcers - on sequential, bilateral, illegal transactions such as corruption, manager-auditor collusion, or drug deals. It is known that leniency helps to deter illegal relationships sustained by repeated interaction. Here we find that - when not properly designed - leniency may simultaneously provide an effective governance mechanism for occasional sequential illegal transactions that would not be feasible in its absence.

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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 90 (2006)
Issue (Month): 6-7 (August)
Pages: 1281-1297

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Handle: RePEc:eee:pubeco:v:90:y:2006:i:6-7:p:1281-1297
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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  19. Joseph E. Harrington, Jr, 2005. "Optimal Corporate Leniency Programs," Economics Working Paper Archive 527, The Johns Hopkins University,Department of Economics.
  20. A. Mitchell Polinsky & Steven Shavell, 1999. "The Economic Theory of Public Enforcement of Law," NBER Working Papers 6993, National Bureau of Economic Research, Inc.
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