DP3560 Information, Corruption and Optimal Law Enforcement

Author(s): Nuno Garoupa, Mohamed Jellal
Publication Date: September 2002
Keyword(s): corruption, fine, information, probability of detection and punishment
JEL(s): K4
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3560

We consider the role of asymmetric information on the emergence of collusion between criminals and enforcers, in the framework proposed by Bowles and Garoupa (1997) and Polinsky and Shavell (2001). Our Paper proposes that the optimal criminal sanction for the underlying offense is not necessarily maximal. We achieve this result by coupling the criminal sanction for the underlying offense with a criminal sanction for corruption, both imposed on offenders. A higher criminal sanction for the underlying offense implies that the government must spend more resources to detect and punish corruption (since the likelihood of collusion increases). Thus, the government could reduce this sanction, save on detection, and increase the criminal sanction for corruption (in order to offset the negative effect on deterrence).