(), Giovanni Immordino
() and Giancarlo Spagnolo
Paolo Buccirossi: LEAR
Giovanni Immordino: Università di Napoli Federico II and CSEF
Giancarlo Spagnolo: Stockholm Institute of Transition Economics, Postal: Stockholm Institute of Transition Economics, Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Abstract: It is often claimed that rewards for whistleblowers lead to fraudulent reports, but for several US programs this was not a major problem. We model the interaction between rewards for whistleblowers, sanctions against fraudulent reporting, judicial errors and standards of proof in the court case on the whistleblower's allegations and the possible follow-up for fraudulent allegations. Balancing whistleblower rewards, sanctions against fraudulent reports, and courts' standards of proof is essential for these policies to succeed. When the risk of retaliation is severe, larger rewards are needed and so are tougher sanctions against fraudulent reports. The precision of the legal system must be sufficiently high, hence these programs are not viable in weak institution environments, where protection is imperfect and court precision low, or where sanctions against false reporting are mild. Internal reporting channels may interfere with the external ones in unexpected ways.
27 pages, First version: June 20, 2017. Revised: August 29, 2017.
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