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Crime and the labor market: a search model with optimal contracts

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  • Bryan Engelhardt
  • Guillaume Rocheteau
  • Peter Rupert

Abstract

This paper extends the Pissarides (2000) model of the labor market to include crime and punishment `a la Becker (1968). All workers, irrespective of their labor force status can commit crimes and the employment contract is determined optimally. The model is used to study, analytically and quantitatively, the effects of various labor market and crime policies. For instance, a more generous unemployment insurance system reduces the crime rate of the unemployed but its effect on the crime rate of the employed depends on job duration and jail sentences. When the model is calibrated to U.S. data, the overall effect on crime is positive but quantitatively small. Wage subsidies reduce unemployment and crime rates of employed and unemployed workers, and improve society’s welfare. Hiring subsidies reduce unemployment but they can raise the crime rate of employed workers. Crime policies (police technology and jail sentences) affect crime rates significantly but have only negligible effects on the labor market.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 0715.

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Date of creation: 2007
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Handle: RePEc:fip:fedcwp:0715

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Keywords: Crime ; Unemployment ; Labor market;

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References

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Cited by:
  1. Thomas Bassetti, Luca Corazzini, Darwin Cortes, 2010. "Crime, Immigration and the Labor Market: A General Equilibrium Model," ISLA Working Papers, ISLA, Centre for research on Latin American Studies and Transition Economies, Universita' Bocconi, Milano, Italy 38, ISLA, Centre for research on Latin American Studies and Transition Economies, Universita' Bocconi, Milano, Italy.
  2. Donato Masciandaro, Francesco Passarelli, 2011. "Financial Systemic Risk: Taxation or Regulation?," ISLA Working Papers, ISLA, Centre for research on Latin American Studies and Transition Economies, Universita' Bocconi, Milano, Italy 41, ISLA, Centre for research on Latin American Studies and Transition Economies, Universita' Bocconi, Milano, Italy.
  3. Manolis Galenianos & Rosalie Liccardo Pacula & Nicola Persico, 2009. "A Search-Theoretic Model of the Retail Market for Illicit Drugs," NBER Working Papers 14980, National Bureau of Economic Research, Inc.
  4. Kyriakos C. Neanidis & Vea Papadopoulou, 2012. "Crime, Fertility, and Economic Growth: Theory and Evidence," Centre for Growth and Business Cycle Research Discussion Paper Series, Economics, The Univeristy of Manchester 163, Economics, The Univeristy of Manchester.
  5. David L. Fuller & Bryan Engelhardt, 2010. "Labor Force Participation and Pair-wise Efficient Contracts with Search and Bargaining," Working Papers, Concordia University, Department of Economics 12005, Concordia University, Department of Economics, revised 20 Jan 2012.
  6. Bryan Engelhardt & Guillaume Rocheteau & Peter Rupert, 2007. "Crime and the labor market: a search model with optimal contracts," Working Paper 0715, Federal Reserve Bank of Cleveland.
  7. Syed Yasir Mahmood Gillani & Rana Ejaz Ali Khan & Abid Rashid Gill, 2011. "Unemployment and Property Crimes in Pakistan," Asian Economic and Financial Review, Asian Economic and Social Society, Asian Economic and Social Society, vol. 1(3), pages 124-133, September.
  8. Bryan Engelhardt, 2008. "The Effect of Employment Frictions on Crime: Theory and Estimation," Working Papers, College of the Holy Cross, Department of Economics 0805, College of the Holy Cross, Department of Economics.
  9. Catalina Gómez Toro & Hermilson Velásquez & Joaquín Andrés Urrego & Juan David Valderrama, 2014. "Efecto de los Ingresos Permanentes sobre el Delito: Un Enfoque Espacial y un Caso de Aplicación," DOCUMENTOS DE TRABAJO CIEF, UNIVERSIDAD EAFIT 010900, UNIVERSIDAD EAFIT.
  10. Bryan Engelhardt & David L. Fuller, 2009. "Efficient Labor Force Participation with Search and Bargaining," Working Papers, College of the Holy Cross, Department of Economics 0909, College of the Holy Cross, Department of Economics, revised Nov 2009.
  11. Thomas Bassetti & Luca Corazzini & Darwin Cortes & Luca Nunziata, 2013. "Do Immigrants Make Us Safer? A Model on Crime, Immigration and the Labor Market," "Marco Fanno" Working Papers 0121, Dipartimento di Scienze Economiche "Marco Fanno".

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