Excess burden of criminality and redistribution

A model where a portion of the population participates in illegal activitie s is developed. The propensity to participate in crimes depends on the prob ability and the opportunity cost of being arrested. The government can infl uence these variables by law enforcement expenditures and by social transfe rs. We analyze the cost minimizing policy mix and the incentive of wealthy agents to finance redistribution. We compare this approach with standard mo delling where redistribution follows from altruistic preferences. (C) 2000 Elsevier Science Inc. All rights reserved.