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The Economics of Organized Crime and Optimal Law Enforcement

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  • Garoupa, Nuno

Abstract

This article extends the optimal law enforcement literature to organized crime. I model the criminal organization as a vertical structure where the principal extracts some rents from the agents through extortion. As long as extortion is a costless transfer from individuals to the criminal organization, not only the existence of extortion is social welfare improving because it makes engaging in a criminal offense less attractive but it also allows the government to reduce expenditures on law enforcement. When extortion is costly because the criminal organization resorts to threats and violence, the existence of extortion is social welfare diminishing and may lead to higher expenditures on law enforcement. Copyright 2000 by Oxford University Press.

Suggested Citation

  • Garoupa, Nuno, 2000. "The Economics of Organized Crime and Optimal Law Enforcement," Economic Inquiry, Western Economic Association International, vol. 38(2), pages 278-288, April.
    • Handle: RePEc:oup:ecinqu:v:38:y:2000:i:2:p:278-88
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    JEL classification:

    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior

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