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Capital and Crime–Corruption Nexus in the Shadow of the Law: A Theoretical Analysis of Public Policy

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  • Rohan Kanti Khan
  • Sushobhan Mahata
  • Ranjanendra Narayan Nag

Abstract

Corruption is a symptom of wider political dynamics intertwined with sectors prone to criminal activities. This arises due to the laxity of legal enforcement or a dysfunctional political system. This paper analytically demonstrates the nexus between organized crime and corruption in the presence of the public sector. The relevant questions at this juncture are: (i) How does capital investment in the industrial sectors affect the crime–corruption nexus? (ii) Why a more stringent law-and-order enforcement may produce counterproductive outcomes? and (iii) Whether the creation of alternative income opportunities in the legally approved sectors by the government will lower corruption and decriminalize society? What we will try to show is that when corruption becomes necessary to sustain the criminal sector, capital expansion and deterrence policy augment crime and corruption. This crucially depends on a multitude of general equilibrium factors including the labor relocation effect, capital relocation effect, and factor intensity of sectors.

Suggested Citation

  • Rohan Kanti Khan & Sushobhan Mahata & Ranjanendra Narayan Nag, 2024. "Capital and Crime–Corruption Nexus in the Shadow of the Law: A Theoretical Analysis of Public Policy," Public Finance Review, , vol. 52(6), pages 791-825, November.
    • Handle: RePEc:sae:pubfin:v:52:y:2024:i:6:p:791-825
    DOI: 10.1177/10911421221127098
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    References listed on IDEAS

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    1. Roberto Burguet & Juan José Ganuza & José Garcia Montalvo, 2016. "The microeconomics of corruption. A review of thirty years of research," Economics Working Papers 1525, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Douglas A. Houston, 2007. "Can Corruption Ever Improve an Economy?," Cato Journal, Cato Journal, Cato Institute, vol. 27(3), pages 325-342, Fall.
    3. James R. Hines, Jr., 1995. "Forbidden Payment: Foreign Bribery and American Business After 1977," NBER Working Papers 5266, National Bureau of Economic Research, Inc.
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    Keywords

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    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • H39 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Other

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