Corruption and the Distortion of Law Enforcement Effort

Luciana Echazu, Clarkson University
Nuno Garoupa, University of Illinois at Urbana-Champaign

Abstract

We consider the distortions that corruption generates in law enforcement. Corruption dilutes deterrence, and hence the government needs to adjust law enforcement activities appropriately. We argue that this distortion is not the only one taking place. A misalignment of goals between the government and the enforcers results in another set of agency costs by which activities that put enforcers in direct contact with criminals increase at the cost of other law enforcement activities. The paper discusses the implications of both distortions.