High-profile Enforcement As an Effective Deterrence Mechanism: Evidence from the Paul Manafort Prosecution and the Foreign Agents Registration Act (fara)
Abstract: This paper presents the introduction of high-profile enforcement as an important, overlooked driver of regulatory compliance. Compared to policy interventions commonly examined in the economics of crime literature, this type of enforcement is not only more likely to provide exogenous variation in actors’ perceived cost of non-compliance, but also requires significantly less resources from policy makers and enforcement agencies. We examine the possible compliance-enhancing effects of the high-profile investigation and indictment of Paul Manafort starting from June, 2017 for non-compliance with the Foreign Agents Registration Act (FARA). Using a difference-in-differences design comparing compliance under FARA to compliance under the Lobbying Disclosure Act, we demonstrate that that news of Manafort's investigation and subsequent indictment led to an economically large, sustained increase in FARA compliance by corporate lobbyists. These findings are especially relevant to the many white-collar anti-corruption laws for which enforcement has historically been very low.
