This paper explores the effects of alternative tax rules regarding monetary sanctions and litigation costs on the levels of criminal activity and litigation expenditure. The key insight is that taxation may affect crime not only by changing the relative expected returns from legal and criminal...

It is a widely accepted conclusion of the economic literature on optimal law enforcement that nonmonetary sanctions should be introduced only when fines have been used up to their maximum extent. In this paper it is shown that when the sanctioning policy conveys information about the harmfulness...