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Corruption and Private Law Enforcement: Theory and History

Nuno Garoupa () and Klerman Daniel M.
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Klerman Daniel M.: University of Illinois College of Law USC Law School

Review of Law & Economics, 2010, vol. 6, issue 1, 75-96

Abstract: This article analyzes private law enforcement in an environment with corruption. The effect of corruption is studied both under the assumption of monopolistic enforcement by a single private enforcement agency and under the assumption of competitive enforcement by many private enforcers. In addition, the model takes into account the different objectives of a benevolent, social-welfare-maximizing group and a self-interested, rent-seeking group, as well as the possibility of a government divided between welfare-maximizing and rent-seeking groups. Among the central results of the paper are (1) corruption is especially problematic under monopolistic enforcement, (2) when governmental decision making is divided, a rent-seeking group which is unable to control the level of fines and rewards usually prefers monopolistic to competitive enforcement. The article demonstrates the plausibility and relevance of the model by examining corruption and private law enforcement in pre-modern England.

Date: 2010
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