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Local Banking Market Frictions and Youth Crime: Evidence from Bank Failures

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  • Amit Ghosh

    (Texas A&M International University)

  • Salvador Contreras

    (The University of Texas Rio Grande Valley)

Abstract

This paper examines the impact of local banking market frictions measured by bank failures on youth crime. Using a difference-in-differences framework, we find white and black youth violent crimes increase by 0.11 and 0.66 per 1000 people, respectively, following a bank failure. Further, we find white property crime, petty delinquency and drug crime increase by 0.29, 0.75 and 0.35 per 1000 people. Black youth see a rise in drug crimes by 0.88 per 1000 people. Results by gender reveal male drug crimes rise by 2.4 and female property crimes by 0.66 per 1000 people, respectively. The economic effects are most persistent for petty delinquency crimes committed by white youths. Furthermore, we find evidence that bank failures worsen local labor markets conditions by increasing white youth unemployment and reduce employment in the limited-services restaurant industry; channels that likely alter the opportunity cost of youth crime.

Suggested Citation

  • Amit Ghosh & Salvador Contreras, 2022. "Local Banking Market Frictions and Youth Crime: Evidence from Bank Failures," Journal of Financial Services Research, Springer;Western Finance Association, vol. 61(1), pages 43-75, February.
    • Handle: RePEc:kap:jfsres:v:61:y:2022:i:1:d:10.1007_s10693-021-00370-z
    DOI: 10.1007/s10693-021-00370-z
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    1. Bernales, Alejandro & Beuermann, Diether W. & Cumming, Douglas & Olid, Christian, 2023. "Blue-Collar Crime and Finance," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 83(C).

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    More about this item

    Keywords

    bank failures; county-level analysis; criminal motivational effect theory; rational choice theory; youth crime; youth employment;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H0 - Public Economics - - General
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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