Department of Economics and Business - Universitat Pompeu Fabra

Title:: Optimal magnitude and probability of fines
Author:: Nuno Garoupa
Date:: April 2000
Abstract:: The economic literature on crime and punishment focuses on the trade-off between probability and severity of punishment, and suggests that detection probability and fines are substitutes. In this paper it is shown that, in presence of substantial underdeterrence caused by costly detection and punishment, these instruments may become complements. When offenders are poor, the deterrent value of monetary sanctions is low. Thus, the government does not invest a lot in detection. If offenders are rich, however, the deterrent value of monetary sanctions is high, so it is more profitable to prosecute them.
Keywords:: Crime, probability and severity of sanctions, law enforcement
JEL codes:: K4
Area of Research:: Business Economics and Industrial Organization
Published in:: European Economic Review, 45, 9, (2001) pp. 1765-1771

Download the paper in PDF format