Corruption and Optimal Law Enforcement
NBER Working Paper No. 6945
This article analyzes corruption of law enforcement agents: payment of bribes to agents so that they will not report violations. Corruption dilutes deterrence because bribe payments are less than sanctions. The state may not be able to offset this effect of bribery by raising sanctions for the underlying offense. Thus, it may be optimal to expend resources to detect and penalize corruption. At the optimum, however, corruption may not be deterred. Nonetheless, it may be desirable to attempt to control corruption in order to raise the offender's costs -- the sum of the bribe payment and the expected sanction for bribery -- and thereby increase deterrence of the underlying violation.
Published: Polinsky, A. Mitchell and Steven Shavell. "Corruption And Optimal Law Enforcement," Journal of Public Economics, 2001, v81(1,Jul), 1-24.
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