Economic Model of Official Crime based on Life Cycle Hypothesis

The dynamic characteristic of official crime will be analyzed by an economic model based on life cycle hypothesis. The model mainly considers the following relevant factors: the risk of being caught and the associated punishment, legislation, work and retirement wage, and retirement age and life expectancy. The official is assumed to be risk neutral. His decision variable is illegal income. The official's objective is to maximize the expected utility subjected to a dynamic constraint. We obtain the explicit expressions for the optimal strategy and the corresponding utility. The main results are as follows: Under certain conditions, it is rational for an official to get income illegally before retirement, and a higher punishment is not necessarily an effective way to deter official crime; the higher the income difference before and after retirement, the higher the probability of official crime. A reduction in retirement age will probably increase official crime. The more the resource that an official controls, the later is the beginning time of official crime. The income pattern that work wage increases with time is helpful to reduce official crime. The effect of income level on official crime reflects some kind of “level effect” and “asymmetrical effect” associated with institutional environments.