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Organized Crime, Corruption and Punishment

Author

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  • Kugler, Maurice
  • Verdier, Thierry
  • Zenou, Yves

Abstract

We analyse an oligopoly model in which differentiated criminal organizations compete on criminal activities and engage in corruption to avoid punishment. When law enforcers are sufficiently well-paid, difficult to bribe and corruption detection highly probable, we show that increasing policing or sanctions effectively deters crime. When bribing costs are low - that is badly-paid and dishonest law enforcers working in a weak governance environment - and the rents from criminal activity relative to legal activity are sufficiently high, we find that increasing policing and sanctions can generate higher crime rates. In particular, the relationship between the traditional instruments of deterrence, namely intensification of policing and increment of sanctions, and crime is non-monotonic. Beyond a threshold, increases in expected punishment induce organized crime to corruption, and ensuing impunity leads to higher rather than lower crime.

Suggested Citation

  • Kugler, Maurice & Verdier, Thierry & Zenou, Yves, 2003. "Organized Crime, Corruption and Punishment," CEPR Discussion Papers 3806, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:3806
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    References listed on IDEAS

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    More about this item

    Keywords

    corruption; deterrence; oligopoly; organized crime; strategic complements;

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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