Whistle-Blowing and the Incentive to Hire

19 Pages Posted: 23 Aug 2018

See all articles by Jef De Mot

Jef De Mot

University of Münster

Murat C. Mungan

George Mason University - Antonin Scalia Law School, Faculty

Date Written: August 22, 2018

Abstract

In this article we focus on a previously neglected cost of whistle-blower awards: employers may base their hiring decisions, on the margin, not on the productivity of an employee but rather on the probability that the employee will become a whistle-blower. We develop a three-stage model to examine how productivity losses due to distortions at the hiring stage influence optimal whistle-blower rewards. We characterize optimal rewards for whistle-blowing, and show that the size of these rewards depend, inter alia, on the relative values of workers' productivity, the punishment for crime, employees' whistle-blowing costs, the degree of non-transferability of the employee's costs, and the social cost of crime.

Keywords: whistle-blowing, crime, deterrence, hiring incentives

JEL Classification: K2, K31, K42, M5, J00

Suggested Citation

De Mot, Jef and Mungan, Murat C., Whistle-Blowing and the Incentive to Hire (August 22, 2018). George Mason Law & Economics Research Paper No. 18-22. Available at SSRN: https://ssrn.com/abstract=3237035 or http://dx.doi.org/10.2139/ssrn.3237035

Jef De Mot

University of Münster

Germany

Murat C. Mungan (Contact Author)

George Mason University - Antonin Scalia Law School, Faculty ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States

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