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Deterrence through Word of Mouth

  • Johannes Rincke
  • Christian Traxler

The deterrent effect of law enforcement rests on the link between the actual and the perceived detection risk. We study the role of word of mouth for this linkage. Our approach makes use of micro data on compliance with TV license fees allowing us to distinguish between households who have been subject to enforcement and those who have not. Exploiting local variation in field inspectors’ efforts induced by snowfall, we find a striking response of households to increased enforcement in their vicinity, with compliance rising significantly among those who had no interaction with inspectors. As we can exclude other channels of information transmission, our finding establishes a substantial deterrent effect mediated by word of mouth.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2549.

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Date of creation: 2009
Date of revision:
Handle: RePEc:ces:ceswps:_2549
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  1. Traxler, Christian & Winter, Joachim, 2012. "Survey evidence on conditional norm enforcement," Munich Reprints in Economics 19645, University of Munich, Department of Economics.
  2. Rafael Di Tella & Ernesto Schargrodsky, 2004. "Do Police Reduce Crime? Estimates Using the Allocation of Police Forces After a Terrorist Attack," American Economic Review, American Economic Association, vol. 94(1), pages 115-133, March.
  3. Kaplow, Louis & Shavell, Steven, 1994. "Optimal Law Enforcement with Self-Reporting of Behavior," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 583-606, June.
  4. Steven D. Levitt, 1995. "Why Do Increased Arrest Rates Appear to Reduce Crime: Deterrence, Incapacitation, or Measurement Error?," NBER Working Papers 5268, National Bureau of Economic Research, Inc.
  5. Drago, Francesco & Galbiati, Roberto & Vertova, Pietro, 2007. "The Deterrent Effects of Prison: Evidence from a Natural Experiment," CEPR Discussion Papers 6401, C.E.P.R. Discussion Papers.
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  12. Henry S. Farber, 2008. "Reference-Dependent Preferences and Labor Supply: The Case of New York City Taxi Drivers," American Economic Review, American Economic Association, vol. 98(3), pages 1069-82, June.
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  16. Kessler, Daniel P & Levitt, Steven D, 1999. "Using Sentence Enhancements to Distinguish between Deterrence and Incapacitation," Journal of Law and Economics, University of Chicago Press, vol. 42(1), pages 343-63, April.
  17. Steven D. Levitt, 2002. "Using Electoral Cycles in Police Hiring to Estimate the Effects of Police on Crime: Reply," American Economic Review, American Economic Association, vol. 92(4), pages 1244-1250, September.
  18. Steven D. Levitt, 1995. "Using Electoral Cycles in Police Hiring to Estimate the Effect of Policeon Crime," NBER Working Papers 4991, National Bureau of Economic Research, Inc.
  19. Edward Miguel & Shanker Satyanath & Ernest Sergenti, 2004. "Economic Shocks and Civil Conflict: An Instrumental Variables Approach," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 725-753, August.
  20. H. Naci Mocan & Hope Corman, 2000. "A Time-Series Analysis of Crime, Deterrence, and Drug Abuse in New York City," American Economic Review, American Economic Association, vol. 90(3), pages 584-604, June.
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