An Offer You Can (Not) Refuse: Organized Crime as the Link between Inequality and Corruption

49 Pages Posted: 5 Apr 2017 Last revised: 30 Mar 2018

Date Written: March 26, 2018

Abstract

Empirical evidence on the causes and effects of inequality suggests the existence of a vicious circle of mutually reinforcing inequality and corruption. Despite the broad empirical evidence, there are only a few formal theoretical models on these dynamics. Relying on a game-theoretic approach, we show how inequality and corruption are interconnected via a crime channel. According to our model, collusion between law enforcement agencies and criminal organizations is more likely in societies characterized by high inequality and/or weak security forces. If those actors collude and, thus, eliminate public security, the citizens are exploited to the greatest possible extent and inequality is perpetuated. At the same time, those societies feature high levels of corruption and criminal activity. Surprisingly, our results allow for the interpretation that policies of lowering inequality or increasing the effectiveness of local police forces may be ineffective countermeasures. We instead suggest that those societies should intervene with non-local law enforcement agencies in order to (re-)establish the rule of law.

Keywords: Inequality, corruption, organized crime, domestic security

JEL Classification: D63, D74

Suggested Citation

Schwuchow, Soeren, An Offer You Can (Not) Refuse: Organized Crime as the Link between Inequality and Corruption (March 26, 2018). Available at SSRN: https://ssrn.com/abstract=2947142 or http://dx.doi.org/10.2139/ssrn.2947142

Soeren Schwuchow (Contact Author)

Brandenburg University of Technology ( email )

Platz der Deutschen Einheit 1
Cottbus, 03046
Germany

HOME PAGE: http://scschwuchow.wordpress.com

Register to save articles to
your library

Register

Paper statistics

Downloads
49
Abstract Views
417
PlumX Metrics