TY - JOUR
T1 - Corruption and the optimal use of nonmonetary sanctions
AU - Garoupa, Nuno
AU - Klerman, Daniel
PY - 2004/6/1
Y1 - 2004/6/1
N2 - This article analyzes the effect of corruption on the use of nonmonetary sanctions such as imprisonment. It is a well-known result in the law enforcement literature that in the absence of corruption, social welfare maximization requires that nonmonetary sanctions should be imposed infrequently. We show that, in the presence of corruption, it is optimal to use (or at least threaten to use) nonmonetary sanctions more often. In addition, optimal nonmonetary penalties will usually be higher in a corrupt environment. Corruption transforms the socially costly nonmonetary sanction into a monetary bribe. Although corruption thus reduces deterrence, nonmonetary sanctions are still useful, because they allow officials to extract higher bribes, thus restoring some deterrence.
AB - This article analyzes the effect of corruption on the use of nonmonetary sanctions such as imprisonment. It is a well-known result in the law enforcement literature that in the absence of corruption, social welfare maximization requires that nonmonetary sanctions should be imposed infrequently. We show that, in the presence of corruption, it is optimal to use (or at least threaten to use) nonmonetary sanctions more often. In addition, optimal nonmonetary penalties will usually be higher in a corrupt environment. Corruption transforms the socially costly nonmonetary sanction into a monetary bribe. Although corruption thus reduces deterrence, nonmonetary sanctions are still useful, because they allow officials to extract higher bribes, thus restoring some deterrence.
KW - Corruption
KW - Nonmonetary sanction
UR - http://www.scopus.com/inward/record.url?scp=7244234341&partnerID=8YFLogxK
U2 - 10.1016/j.irle.2004.08.006
DO - 10.1016/j.irle.2004.08.006
M3 - Article
AN - SCOPUS:7244234341
SN - 0144-8188
VL - 24
SP - 219
EP - 225
JO - International Review Of Law And Economics
JF - International Review Of Law And Economics
IS - 2
ER -