Optimal Magnitude and Probability of Fines
Universitat Pompeu Fabra Working Paper No. 454
10 Pages Posted: 3 Aug 2000
Date Written: April 2, 2000
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.
Keywords: Crime, Probability and Severity of Sanctions, Law Enforcement
JEL Classification: K4
Suggested Citation: Suggested Citation