Tolerance of Noncompliance: Discretion Rather Than Simple Rules?

Abstract

We argue that societies sometimes choose not to enforce the law to gain “flexibility”. Especially developing countries face a dilemma between discretion and commitment to only partially-contingent rules. Rules are good for incentives, but discretion may be more “flexible”. We embed this dilemma in a political model and show that citizens will not support strong enforcement institutions unless the state is able to commit to sufficiently sophisticated redistributive policies.

Keywords: Discretion, commitment, simple rules, informality, enforcement

JEL Classification: D71, D81, E26, O17