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Organised crime, corruption and punishment

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

We analyse an oligopoly model in which differentiated criminal organisations globally compete on criminal activities and engage in local 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. However, when bribing costs are low, that is badly-paid and dishonest law enforcers work 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 sanctions, and the crime rate is nonmonotonic. Beyond a threshold, further increases in intended expected punishment create incentives for organised crime extending corruption rings, and ensuing impunity results in a fall of actual expected punishment that yields more rather than less crime. Keywords; intended deterrence, organised crime, weak governance, corruption

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Paper provided by Economics Division, School of Social Sciences, University of Southampton in its series Discussion Paper Series In Economics And Econometrics with number 0407.

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Date of creation: 01 Jan 2004
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Handle: RePEc:stn:sotoec:0407
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  1. Kugler, Maurice & Verdier, Thierry & Zenou, Yves, 2003. "Organized Crime, Corruption and Punishment," CEPR Discussion Papers 3806, C.E.P.R. Discussion Papers.
  2. Abdala Mansour & Nicolas Marceau & Steeve Mongrain, 2006. "Gangs and Crime Deterrence," Journal of Law, Economics and Organization, Oxford University Press, vol. 22(2), pages 315-339, October.
  3. Bowles, Roger & Garoupa, Nuno, 1997. "Casual police corruption and the economics of crime," International Review of Law and Economics, Elsevier, vol. 17(1), pages 75-87, March.
  4. Fender, John, 1999. "A general equilibrium model of crime and punishment," Journal of Economic Behavior & Organization, Elsevier, vol. 39(4), pages 437-453, July.
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  6. Maurice Kugler & Howard Rosental, 2000. "Checks and balances: an assessment of the institutional separtion of political powers in Colombia," WORKING PAPERS SERIES. DOCUMENTOS DE TRABAJO 002117, FEDESARROLLO.
  7. Steven D. Levitt, 1997. "Juvenile Crime and Punishment," NBER Working Papers 6191, National Bureau of Economic Research, Inc.
  8. Besley, Timothy & McLaren, John, 1993. "Taxes and Bribery: The Role of Wage Incentives," Economic Journal, Royal Economic Society, vol. 103(416), pages 119-41, January.
  9. Mookherjee, Dilip & Png, I P L, 1992. "Monitoring vis-a-vis Investigation in Enforcement of Law," American Economic Review, American Economic Association, vol. 82(3), pages 556-65, June.
  10. Jellal, Mohamed & Garoupa, Nuno, 2007. "Information corruption and optimal law enforcement," MPRA Paper 38413, University Library of Munich, Germany.
  11. Shavell, Steven, 1987. "The Optimal Use of Nonmonetary Sanctions as a Deterrent," American Economic Review, American Economic Association, vol. 77(4), pages 584-92, September.
  12. Arun S. Malik, 1990. "Avoidance, Screening and Optimum Enforcement," RAND Journal of Economics, The RAND Corporation, vol. 21(3), pages 341-353, Autumn.
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  14. A. Mitchell Polinsky & Steven Shavell, 1999. "The Economic Theory of Public Enforcement of Law," NBER Working Papers 6993, National Bureau of Economic Research, Inc.
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  17. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
  18. Sah, R.K., 1990. "Social Osmosis And Patterns Of Crime: A Dynamic Economic Analysis," Papers 609, Yale - Economic Growth Center.
  19. A. Mitchell Polinsky & Steven Shavell, 1999. "Corruption and Optimal Law Enforcement," NBER Working Papers 6945, National Bureau of Economic Research, Inc.
  20. Chang, Juin-jen & Lai, Ching-chong & Yang, C. C., 2000. "Casual police corruption and the economics of crime:: Further results," International Review of Law and Economics, Elsevier, vol. 20(1), pages 35-51, March.
  21. Basu, Kaushik & Bhattacharya, Sudipto & Mishra, Ajit, 1992. "Notes on bribery and the control of corruption," Journal of Public Economics, Elsevier, vol. 48(3), pages 349-359, August.
  22. Yves Zenou & Sebastien Steinmetz, 2001. "On the Existence of Spatial Monopolies Under Free Entry," Economics Bulletin, AccessEcon, vol. 4(8), pages 1-10.
  23. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  24. Polinsky, Mitchell & Shavell, Steven, 1979. "The Optimal Tradeoff between the Probability and Magnitude of Fines," American Economic Review, American Economic Association, vol. 69(5), pages 880-91, December.
  25. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
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