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Discussion Paper Details

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Title: Leniency Policies and Illegal Transactions

Author(s): Paolo Buccirossi and Giancarlo Spagnolo

Publication Date: December 2005

Keyword(s): amnesty, collusion, corruption, financial fraud, governance, hold up, hostages, illegal trade, immunity, law enforcement, leniency, organized crime, self-reporting and whistleblowers

Programme Area(s): Financial Economics, Industrial Organization and Public Economics

Abstract: We study the consequences of leniency - reduced legal sanctions for wrongdoers who spontaneously self-report to law enforcers - on sequential, bilateral, illegal transactions such as corruption, manager-auditor collusion, or drug deals. It is known that leniency helps to deter illegal relationships sustained by repeated interaction. Here we find that - when not properly designed - leniency may simultaneously provide an effective governance mechanism for occasional sequential illegal transactions that would not be feasible in its absence.

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Bibliographic Reference

Buccirossi, P and Spagnolo, G. 2005. 'Leniency Policies and Illegal Transactions'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=5442