DP12957 Myths and Numbers on Whistleblower Rewards

Author(s): Theo Nyrerod, Giancarlo Spagnolo
Publication Date: May 2018
Keyword(s): Corruption, Financial incentives, fraud, law enforcement, retaliation, tax evasion, whistleblower protection, Whistleblower rewards
JEL(s): G38, K20, K42, L40, M41
Programme Areas: Public Economics, Financial Economics, Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=12957

Whistleblower rewards have been used extensively in the US to limit procurement fraud and tax evasion, and their use has been extended to fight financial fraud after the recent financial crisis. There is currently a debate on their possible introduction in Europe, but authorities there appear considerably less enthusiastic than their US counterparts. While it is important that these tools are scrutinized in a lively democratic debate, many things have been written - even by important institutional players - that have no empirical backing or that are in open contrast to the available evidence from independent research. In this paper we review some of the most debated issues regarding the potential benefits and costs of financial incentives for whistleblowers, while trying to separate existing evidence from conjectures with no empirical support, and myths in contrast to available evidence.