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Optimal magnitude and probability of fines

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  • Nuno Garoupa

Abstract

The economic literature on crime and punishment focuses on the trade-off between probability and severity of punishment, and suggests that detection probability and fines are substitutes. In this paper it is shown that, in presence of substantial underdeterrence caused by costly detection and punishment, these instruments may become complements. When offenders are poor, the deterrent value of monetary sanctions is low. Thus, the government does not invest a lot in detection. If offenders are rich, however, the deterrent value of monetary sanctions is high, so it is more profitable to prosecute them.

Suggested Citation

  • Nuno Garoupa, 2000. "Optimal magnitude and probability of fines," Economics Working Papers 454, Department of Economics and Business, Universitat Pompeu Fabra.
  • Handle: RePEc:upf:upfgen:454
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    References listed on IDEAS

    as
    1. Polinsky, A Mitchell & Shavell, Steven, 1992. "Enforcement Costs and the Optimal Magnitude and Probability of Fines," Journal of Law and Economics, University of Chicago Press, vol. 35(1), pages 133-148, April.
    2. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters,in: Essays in the Economics of Crime and Punishment, pages 1-54 National Bureau of Economic Research, Inc.
    3. Shavell, Steven, 1987. "The Optimal Use of Nonmonetary Sanctions as a Deterrent," American Economic Review, American Economic Association, vol. 77(4), pages 584-592, September.
    4. Lewin, Jeff L. & Trumbull, William N., 1990. "The social value of crime?," International Review of Law and Economics, Elsevier, vol. 10(3), pages 271-284, December.
    5. Polinsky, A. Mitchell & Shavell, Steven, 1984. "The optimal use of fines and imprisonment," Journal of Public Economics, Elsevier, vol. 24(1), pages 89-99, June.
    6. Kaplow, Louis, 1992. "The optimal probability and magnitude of fines for acts that definitely are undesirable," International Review of Law and Economics, Elsevier, vol. 12(1), pages 3-11, March.
    7. Steven Shavell & A. Mitchell Polinsky, 2000. "The Economic Theory of Public Enforcement of Law," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 45-76, March.
    8. Polinsky, A Mitchell & Shavell, Steven, 1991. "A Note on Optimal Fines When Wealth Varies among Individuals," American Economic Review, American Economic Association, vol. 81(3), pages 618-621, June.
    9. Garoupa, Nuno, 1997. " The Theory of Optimal Law Enforcement," Journal of Economic Surveys, Wiley Blackwell, vol. 11(3), pages 267-295, September.
    10. Shavell, Steven, 1993. "The Optimal Structure of Law Enforcement," Journal of Law and Economics, University of Chicago Press, vol. 36(1), pages 255-287, April.
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    More about this item

    Keywords

    Crime; probability and severity of sanctions; law enforcement;

    JEL classification:

    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior

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