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Poverty traps, economic inequality and delinquent incentives

Author

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  • Edgar Villa
  • Andres Salazar

Abstract

This paper explores theoretical linkages between poverty traps, economic inequality and delinquency in a two sector overlapping generations model under perfect competition in which barriers to skilled educational attainment and delinquent incentives interact. We find that the existence of a poverty trap under high economic inequality and costly indivisible human capital investments generate persistent delinquency. We study shocks that increase skilled wages or reduce assets for the unskilled and find that these temporal shocks produce an outburst of delinquency in the short run that die out later on. If the shock is permanent then delinquency increases permanently in the long run. Furthermore, we find that when law enforcement policies increase deterrence and incapacitation permanently delinquency dimineshes en the long run but is accompanied by an increase in wealth inequality. We also find that subsidies for human capital investments can have an ambiguous effect on delinquency in the long run.

Suggested Citation

  • Edgar Villa & Andres Salazar, 2010. "Poverty traps, economic inequality and delinquent incentives," Vniversitas Económica 8214, Universidad Javeriana - Bogotá.
    • Handle: RePEc:col:000416:008214
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    File URL: http://cea.javeriana.edu.co/documents/153049/2786252/Vol.10_2_2010.pdf/6655f489-4006-4d51-812b-34ecb0af51f1
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    References listed on IDEAS

    as
    1. Lance Lochner, 2010. "Education Policy and Crime," NBER Chapters, in: Controlling Crime: Strategies and Tradeoffs, pages 465-515, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    Poverty Traps; Inequality; Delinquency; Human Capital;
    All these keywords.

    JEL classification:

    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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