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Leniency Policies and Illegal Transactions

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  • Spagnolo, Giancarlo
  • Buccirossi, Paolo

Abstract

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 to deter 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.

Suggested Citation

  • Spagnolo, Giancarlo & Buccirossi, Paolo, 2005. "Leniency Policies and Illegal Transactions," CEPR Discussion Papers 5442, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:5442
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    More about this item

    Keywords

    Amnesty; Corruption; Collusion; Financial fraud; Governance; Hold up; Hostages; Illegal trade; Immunity; Law enforcement;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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