DP7071 Legal Standards, Enforcement and Corruption

Author(s): Giovanni Immordino, Marco Pagano
Publication Date: December 2008
Keyword(s): corruption, enforcement, legal standards, tollbooth view
JEL(s): D73, K42, L51
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=7071

Stricter laws require more incisive and costlier enforcement. Since enforcement activity depends both on available tax revenue and the honesty of officials, the optimal legal standard of a benevolent government is increasing in per-capita income and decreasing in officials' corruption. In contrast to the "tollbooth view" of regulation, the standard chosen by a self-interested government is a non-monotonic function of officials' corruption, and can be either lower or higher than that chosen by a benevolent regulator. International evidence on environmental regulation show that standards correlate positively with per-capita income, and negatively with corruption, consistently with the model's predictions for benevolent governments