53 Pages Posted: 26 May 2020 Last revised: 23 May 2021
Date Written: May 2020
A policy of deputization asks agents to monitor others without providing explicit incentives. It is often used to prevent dangerous activities. To calibrate whether and why it works, we study recent laws that deputized financial professionals to help fight elder financial abuse. We show deputization led to a 4%-6% decrease in suspected cases and a 4.5% drop in personal bankruptcies. Women, minorities, and unmarried people benefited more. Effectiveness operated through higher community-mindedness and deeper social connections. Egoistic incentives, legal concerns, publicity, and religiosity were less important. This suggests that regulators can rely on social networks to solve tough problems.
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