Economics of Money Laundering: A Primer
Bocconi University - Department of Economics
Paolo Baffi Centre Bocconi University Working Paper No. 171
Only in recent times has economic analysis developed a special focus on financial issues related to the study of criminal activity, thus far completely absent in the literature. The basic theoretical reason lies in the absence of special treatment of monetary and financial aspects within the traditional Becker model.In this paper I discuss a simple but hopefully useful frame-work to understand the mechanisms of money laundering. I will show how, from a microeconomic point of view, money laundering performs an illegal monetary function, responding to the overall demand for black finance services, expressed by individuals or groups that have committed income-producing crimes. The micro foundations of money laundering allow us to shed light on its macroeconomic effects (the money laundering multipler).
Number of Pages in PDF File: 22
Keywords: money laundering, microfoundations, multiplier
JEL Classification: F2, G3
Date posted: March 19, 2007
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