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Legal Standards, Enforcement, and Corruption

  • Giovanni Immordino
  • Marco Pagano

Stricter laws require more incisive and costlier enforcement. Because enforcement activity depends both on available tax revenue and the honesty of officials, the optimal legal standard of a benevolent government is increasing in per capita income and decreasing in officials' corruption. In contrast to the "tollbooth view" of regulation, the standard chosen by a self-interested government is a non-monotonic function of officials' corruption, and can be either lower or higher than that chosen by a benevolent regulator. International evidence on environmental regulation shows that standards correlate positively with per-capita income, and negatively with corruption, consistent with the model's predictions for benevolent governments. (JEL: D73, K42, L51) (c) 2010 by the European Economic Association.

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Article provided by MIT Press in its journal Journal of the European Economic Association.

Volume (Year): 8 (2010)
Issue (Month): 5 (09)
Pages: 1104-1132

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Handle: RePEc:tpr:jeurec:v:8:y:2010:i:5:p:1104-1132
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