Leniency Policies and Illegal Transactions

Buccirossi, Paolo and Spagnolo, Giancarlo (September 2005): Leniency Policies and Illegal Transactions. SFB/TR 15 Discussion Paper No. 74

Abstract

Forthcoming in the Journal of Public Economics. 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 deterring 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.

• Item Type: Paper
• Keywords: amnesty, corruption, collusion, financial fraud, governance, hold up, hostages, illegal trade, immunity, law enforcement, leniency, organized crime, self-reporting, whistleblowers
• Faculties: Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems; Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > C2 - Intellektuelles Eigentum, Aneignung von Innovationserträgen und Innovationswettbewerb; Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > C6 - Kommunikations- und Transporttechnologien, Industrie- und Regionalstruktur
• Subjects: 300 Social sciences > 330 Economics
• JEL Classification: K42, K21
• Language: English