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Discussion Paper Details

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Title: Organized Crime, Corruption and Punishment

Author(s): Maurice Kugler, Thierry Verdier and Yves Zenou

Publication Date: February 2003

Keyword(s): corruption, deterrence, oligopoly, organized crime and strategic complements

Programme Area(s): Public Economics

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.

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Bibliographic Reference

Kugler, M, Verdier, T and Zenou, Y. 2003. 'Organized Crime, Corruption and Punishment'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=3806