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Leniency Policies and Illegal Transactions

Giancarlo Spagnolo and Paolo Buccirossi

No 5442, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the consequences of leniency - reduced legal sanctions for wrongdoers who spontaneously self-report to law enforcers - on sequential, bilateral, illegal transactions such as corruption, manager-auditor collusion, or drug deals. It is known that leniency helps to deter illegal relationships sustained by repeated interaction. Here we find that - when not properly designed - leniency may simultaneously provide an effective governance mechanism for occasional sequential illegal transactions that would not be feasible in its absence.

Keywords: Amnesty; Corruption; Collusion; Financial fraud; Governance; Hold up; Hostages; Illegal trade; Immunity; Law enforcement (search for similar items in EconPapers)
JEL-codes: D73 G38 K21 K42 M42 (search for similar items in EconPapers)
Date: 2005-12
New Economics Papers: this item is included in nep-com, nep-fin, nep-law and nep-reg
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Journal Article: Leniency policies and illegal transactions (2006) Downloads
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