IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v216y2022ics0165176522001537.html
   My bibliography  Save this article

Corruption and the case for safe-harbor regulation

Author

Listed:
  • De Chiara, Alessandro
  • Manna, Ester

Abstract

We study whether the joint adoption of ex-ante regulation and ex-post liability leads to a higher level of welfare in a setting in which firms invest resources to develop an innovative product that can have negative social repercussions. We allow for firm-regulator corruption and compare two alternative regulatory regimes: lenient authorization and strict authorization. Corruption favors strict authorization and strengthens the case for making firms immune from ex-post liability so as to encourage ex-ante investment. By contrast, when lenient authorization is adopted, firms should not be insulated from liability. Hence, liability should be more severe when corruption is less common.

Suggested Citation

  • De Chiara, Alessandro & Manna, Ester, 2022. "Corruption and the case for safe-harbor regulation," Economics Letters, Elsevier, vol. 216(C).
    • Handle: RePEc:eee:ecolet:v:216:y:2022:i:c:s0165176522001537
    DOI: 10.1016/j.econlet.2022.110546
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176522001537
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2022.110546?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hiriart, Yolande & Martimort, David & Pouyet, Jerome, 2010. "The public management of risk: Separating ex ante and ex post monitors," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 1008-1019, December.
    2. De Chiara, Alessandro & Manna, Ester, 2022. "Corruption, regulation, and investment incentives," European Economic Review, Elsevier, vol. 142(C).
    3. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 1-54, National Bureau of Economic Research, Inc.
    4. Immordino, Giovanni & Pagano, Marco & Polo, Michele, 2011. "Incentives to innovate and social harm: Laissez-faire, authorization or penalties?," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 864-876, August.
    5. Joshua Schwartzstein & Andrei Shleifer, 2013. "An Activity-Generating Theory of Regulation," Journal of Law and Economics, University of Chicago Press, vol. 56(1), pages 1-38.
    6. Steven Shavell, 1984. "A Model of the Optimal Use of Liability and Safety Regulation," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 271-280, Summer.
    7. Shavell, S., 1986. "The judgment proof problem," International Review of Law and Economics, Elsevier, vol. 6(1), pages 45-58, June.
    8. Tirole, Jean, 1986. "Hierarchies and Bureaucracies: On the Role of Collusion in Organizations," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 2(2), pages 181-214, Fall.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Julien Jacob & Caroline Orset, 2020. "Innovation, information, lobby and tort law under uncertainty," Working Papers of BETA 2020-25, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    2. De Chiara, Alessandro & Manna, Ester, 2022. "Corruption, regulation, and investment incentives," European Economic Review, Elsevier, vol. 142(C).
    3. Andrzej Baniak & Peter Grajzl, 2016. "Controlling Product Risks when Consumers Are Heterogeneously Overconfident: Producer Liability versus Minimum-Quality-Standard Regulation," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 172(2), pages 274-304, June.
    4. Pedro Herrera & Oscar Millones, 2011. "¿Cuál Es El Costo De La Contaminación Ambiental Minera Sobre Los Recursos Hídricos En El Perú?," Documentos de Trabajo / Working Papers 2011-321, Departamento de Economía - Pontificia Universidad Católica del Perú.
    5. Gérard Mondello, 2013. "Ambiguous Beliefs on Damages and Civil Liability Theories"," Post-Print halshs-00929948, HAL.
    6. Andrzej Baniak & Peter Grajzl, 2014. "Controlling Product Risks when Consumers are Heterogeneously Overconfident: Producer Liability vs. Minimum Quality Standard Regulation," CESifo Working Paper Series 5003, CESifo.
    7. Angelova, Vera & Attanasi, Giuseppe & Hiriart, Yolande, 2016. "Relative performance of liability rules: Experimental evidence," SFB 649 Discussion Papers 2016-028, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    8. Giovanni Immordino & Michele Polo, 2014. "Public Policies in Investment-Intensive Industries," World Scientific Book Chapters, in: Martin Peitz & Yossi Spiegel (ed.), THE ANALYSIS OF COMPETITION POLICY AND SECTORAL REGULATION, chapter 13, pages 365-388, World Scientific Publishing Co. Pte. Ltd..
    9. De Chiara, Alessandro & Elizalde, Idoia & Manna, Ester & Segura-Moreiras, Adrian, 2021. "Car accidents in the age of robots," International Review of Law and Economics, Elsevier, vol. 68(C).
    10. Vera Angelova & Olivier Armantier & Giuseppe Attanasi & Yolande Hiriart, 2014. "Relative performance of liability rules: experimental evidence," Theory and Decision, Springer, vol. 77(4), pages 531-556, December.
    11. Pierre Bentata, 2014. "Liability as a complement to environmental regulation: an empirical study of the French legal system," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 16(3), pages 201-228, July.
    12. Gérard Mondello, 2015. "Civil liability, Knight's UnCertainty and non-diCtatorial regUlator Documents de travail GREDEG GREDEG Working Papers Series," Working Papers hal-01251437, HAL.
    13. Miceli Thomas J. & Segerson Kathleen, 2013. "Liability versus Regulation for Dangerous Products When Consumers Vary in Their Susceptibility to Harm and May Misperceive Risk," Review of Law & Economics, De Gruyter, vol. 9(3), pages 341-355, December.
    14. Mondello, Gérard, 2012. "La responsabilité environnementale des prêteurs : difficultés juridiques et ensemble des possibles," L'Actualité Economique, Société Canadienne de Science Economique, vol. 88(2), pages 257-278, Juin.
    15. Vasiliki Bageri & Yannis Katsoulacos & Giancarlo Spagnolo, 2013. "The Distortive Effects of Antitrust Fines Based on Revenue," Economic Journal, Royal Economic Society, vol. 123(11), pages 545-557, November.
    16. De Chiara, Alessandro & Livio, Luca, 2017. "The threat of corruption and the optimal supervisory task," Journal of Economic Behavior & Organization, Elsevier, vol. 133(C), pages 172-186.
    17. Thomas J. Miceli, 2013. "Collective Responsibility," Working papers 2013-23, University of Connecticut, Department of Economics.
    18. Arjona Trujillo, Ana María, 2002. "La corrupción política: una revisión de la literatura," DE - Documentos de Trabajo. Economía. DE de021404, Universidad Carlos III de Madrid. Departamento de Economía.
    19. Suurmond, Guido, 2007. "The effects of the enforcement strategy," MPRA Paper 21142, University Library of Munich, Germany.
    20. Friehe, Tim & Langlais, Eric, 2015. "On the political economy of public safety investments," International Review of Law and Economics, Elsevier, vol. 41(C), pages 7-16.

    More about this item

    Keywords

    Corruption; Innovation; Liability; Regulatory capture; Safe harbor;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:216:y:2022:i:c:s0165176522001537. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.