Corruption, Exogenous Changes in Incentives and Deterrence

In this article we apply and extend the model elaborated by Acemoglu and Verdier in their seminal paper (2000), to examine how the economy represented in their theoretical framework responds to an exogenous change in the agent's incentive. In particular, we focus on the consequences of a famous sentence of the Italian Supreme Court in plenary session, no. 500 of 1999, in which a revolutionary interpretation of civil liability rules is introduced, allowing private agents of our economy to appear before the court to demand reimbursement for the damages suffered as a consequence of illicit behavior of the public administration. This is one of the few cases in which the judex substantially makes law in a system of civil law, and the modification in incentive whether or not to be corrupted comes from an authority that is not part of the game (the jurisdictional power). Basing our affirmations on the model, we can say that corruption may have declined in Italy since the year 2000, as a result of a change in the incentives for both private agents and bureaucrats.