NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Deputization

Bruce I. Carlin, Tarik Umar, Hanyi Yi

NBER Working Paper No. 27225
Issued in May 2020
NBER Program(s):Economics of Aging, Corporate Finance, Law and Economics, Public Economics, Political Economy

A policy of deputization asks agents to monitor others without providing explicit incentives. It is often used to prevent dangerous activities. To calibrate whether and why it works, we study recent laws that deputized financial professionals to help fight elder financial abuse. We show deputization led to a 4%-6% decrease in suspected cases and a 4.5% drop in personal bankruptcies. Women, minorities, and unmarried people benefited more. Effectiveness operated through higher community-mindedness and deeper social connections. Egoistic incentives, legal concerns, publicity, and religiosity were less important. This suggests that regulators can rely on social networks to solve tough problems.

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Document Object Identifier (DOI): 10.3386/w27225

 
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