Snitching for Dollars: The Economics and Public Policy of Federal Civil Bounty Programs

Abstract:     
The federal government routinely pays individuals for tips that facilitate its regulatory and law enforcement efforts. However, in the aftermath of public reaction to Linda Tripp's role in bringing the Clinton-Lewinsky affair to light, combined with recent hostility toward IRS informant and collection practices, such bounty programs have fallen out of social and political favor. Indeed, the bounty programs federal agencies offer are vastly inconsistent and devoid of a clear understanding of the incentives facing potential informants. These political and technical shortcomings of bounty programs undermine their effectiveness.

In this article, Ferziger and Currell examine four federal bounty schemes--the False Claims Act and the schemes created by the SEC, IRS, and U.S. Customs Service--constructing an economic model to aid agencies and legislators alike in the formulation of more efficient and effective bounty programs. The authors first articulate a framework through which existing programs can be analyzed, elucidating such factors as informant anonymity, bounty award amounts, administrative program costs, and program publicity. Upon this framework, the authors set forth their comprehensive model of the incentives and motives underlying agency-informant interaction throughout the bounty process. Taking into account a host of sociopolitical concerns, the authors then demonstrate the real-world applicability of the economic model they have fashioned.

Number of Pages in PDF File: 68

JEL Classification: H3, D81, K3

Accepted Paper Series