Organized Crime, Corruption and Punishment

38 Pages Posted: 25 Apr 2003

See all articles by Maurice Kugler

Maurice Kugler

Wilfrid Laurier University - School of Business & Economics; Harvard University - Center for International Development (CID); Centre for International Governance Innovation (CIGI); National Bureau of Economic Research (NBER)

Thierry Verdier

Paris School of Economics (PSE); Pontifical Catholic University of Rio de Janeiro (PUC-Rio) - Department of Economics; Centre for Economic Policy Research (CEPR)

Yves Zenou

Stockholm University; Monash University - Department of Economics; Research Institute of Industrial Economics (IUI); IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

Date Written: February 2003

Abstract

We analyse an oligopoly model in which differentiated criminal organizations compete on criminal activities and engage in corruption to avoid punishment. When law enforcers are sufficiently well-paid, difficult to bribe and corruption detection highly probable, we show that increasing policing or sanctions effectively deters crime. When bribing costs are low - that is badly-paid and dishonest law enforcers working in a weak governance environment - and the rents from criminal activity relative to legal activity are sufficiently high, we find that increasing policing and sanctions can generate higher crime rates. In particular, the relationship between the traditional instruments of deterrence, namely intensification of policing and increment of sanctions, and crime is non-monotonic. Beyond a threshold, increases in expected punishment induce organized crime to corruption, and ensuing impunity leads to higher rather than lower crime.

Keyword: Deterrence, organized crime, corruption, strategic complements, oligopoly

JEL Classification: K42, L13

Suggested Citation

Kugler, Maurice and Verdier, Thierry and Zenou, Yves and Zenou, Yves, Organized Crime, Corruption and Punishment (February 2003). Available at SSRN: https://ssrn.com/abstract=397423

Maurice Kugler

Wilfrid Laurier University - School of Business & Economics ( email )

Waterloo, Ontario N2L 3C5
CANADA

Harvard University - Center for International Development (CID) ( email )

One Eliot Street Building
79 JFK Street
Cambridge, MA 02138
United States

Centre for International Governance Innovation (CIGI) ( email )

57 Erb Street West
Waterloo, Ontario N2L 6C2
Canada

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Thierry Verdier (Contact Author)

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014
France

Pontifical Catholic University of Rio de Janeiro (PUC-Rio) - Department of Economics ( email )

Rua Marques de Sao Vicente, 225/206F
Rio de Janeiro, RJ 22453
Brazil

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Yves Zenou

Stockholm University ( email )

Universitetsvägen 10
Stockholm, Stockholm SE-106 91
Sweden

Monash University - Department of Economics ( email )

Australia

Research Institute of Industrial Economics (IUI) ( email )

P.O. Box 5501
S-114 85 Stockholm
Sweden

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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