Optimal law enforcement and welfare in the presence of organized crime

Arbeitspapier

This paper explores the optimal law enforcement strategy of a Leviathan government in the presence of organized crime. The government is considered too weak to prevent an upsurge in crime, so it allows the mafia to generate a positive payoff by extracting rents in the shadow economy. From a strategic standpoint, the government, if it has the possibility to monitor shadow production and fine offenders, may not want to shut down illegal production or kick out the mafia, but instead can use its policing activity to capture additional revenue through fines on illegal firm activities and an increased tax base when mafia-harassed firms return to the legal sector. The option of escaping into the shadow economy can benefit some firms, even when this utility is diluted by the presence of a mafia. Monitoring hurts both legal and illegal firms, while the government benefits.

Object Details

• ISBN: 978-952-462-951-5
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: BOFIT Discussion Papers ; No. 30/2008

Classification and Topics

• Classification: Wirtschaft ; Tax Evasion and Avoidance ; Public Goods ; Illegal Behavior and the Enforcement of Law
• Subject: organized crime ; shadow economy ; taxation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Pääkkönen, Jenni
• Event: Veröffentlichung
• (who): Bank of Finland, Institute for Economies in Transition (BOFIT)
• (where): Helsinki
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/212643
• Last update: 10.03.2025, 11:43 AM CET