Whistle-Blowing and the Incentive to Hire

22 Pages Posted: 23 Aug 2018 Last revised: 26 Jan 2024

See all articles by Jef De Mot

Jef De Mot

University of Münster

Murat C. Mungan

Texas A&M University School of Law

Date Written: August 22, 2018


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 depends on the harm from crime, the punishment for crime, and the relative responsiveness of the employer's hiring decisions and offending decisions. Moreover, when rewards can be chosen according to either the benefits of the employer from offending or the productivity of the worker being hired, productivity-based rewards are superior to benefit-based rewards.

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). Economic Inquiry, Forthcoming, George Mason Law & Economics Research Paper No. 18-22, Texas A&M University School of Law Legal Studies Research Paper No. 24-14, Available at SSRN: https://ssrn.com/abstract=3237035 or http://dx.doi.org/10.2139/ssrn.3237035

Jef De Mot

University of Münster


Murat C. Mungan (Contact Author)

Texas A&M University School of Law

1515 Commerce St.
Fort Worth, TX Tarrant County 76102
United States

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