The economics of organized crime and optimal law enforcement

Nuno Garoupa

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: This paper extends the optimal law enforcement literature to organized crime. We model the criminal organization as a vertical structure where the principal extracts some rents from the agents through extortion. Depending on the principal's information set, threats may or may not be credible. As long as threats are credible, the principal is able to fully extract rents. In that case, the results obtained by applying standard theory of optimal law enforcement are robust: we argue for a tougher policy. However, when threats are not credible, the principal is not able to fully extract rents and there is violence. Moreover, we show that it is not necessarily true that a tougher law enforcement policy should be chosen when in presence of organized crime.

Keywords: Crime; punishment; law (search for similar items in EconPapers)
JEL-codes: K4 (search for similar items in EconPapers)
Date: 1997-09, Revised 1997-12
New Economics Papers: this item is included in nep-cdm and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: The Economics of Organized Crime and Optimal Law Enforcement (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:246

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