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A Dynamic Model of Differential Human Capital and Criminal Activity

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Author Info
H. Naci Mocan
Stephen C. Billups
Jody Overland

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Abstract

This paper presents a new, dynamic economic model of criminal activity. Individuals are endowed with legal and criminal human capital. Potential incomes in legal and criminal sectors depend on the level of the relevant human capital, the rate of return, and random shocks. Both types of human capital can be enhanced by participating in the relevant sector. Legal human capital can also be enhanced through savings. Each type of human capital is subject to depreciation. Individuals maximize expected discounted lifetime utility, which depends on consumption. In this two-stage dynamic stochastic model, in each period the individual decides in which sector to participate (legal or illegal), and after the realization of income in that period, he decides on the optimal amount of consumption. A particular decision (e.g. participation in the criminal sector) has implications both for future decisions as well as the choices available to the individual in later periods. The model allows analyses of the effects of recessions, neighborhood effects, various imprisonment/rehabilitation scenarios, risk aversion, and time preferences on criminal behavior. It provides new insights, which are different from existing models, and it is able to explain the declining propensity of individuals to commit crimes over time.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7584.

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Date of creation: Mar 2000
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Handle: RePEc:nbr:nberwo:7584

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Find related papers by JEL classification:
C61 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Optimization Techniques; Programming Models; Dynamic Analysis
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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  1. repec:bep:dewple:2004-1-1086 is not listed on IDEAS
  2. Rafael Di Tella & Sebastian Galiani & Ernesto Schargrodsky, 2006. "Crime Distribution & Victim Behavior During a Crime Wave," William Davidson Institute Working Papers Series wp849, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  3. Jr-Tsung Huang, 2007. "Labor force participation and juvenile delinquency in Taiwan: a time series analysis," Journal of Family and Economic Issues, Springer, vol. 28(1), pages 137-150, March. [Downloadable!] (restricted)
  4. Mocan, H. Naci & Tekin, Erdal, 2003. "Guns, Drugs and Juvenile Crime: Evidence from a Panel of Siblings and Twins," IZA Discussion Papers 932, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  5. Julie L. Hotchkiss, 2004. "Employment growth and labor force participation: how many jobs are enough?," Working Paper 2004-25, Federal Reserve Bank of Atlanta. [Downloadable!]
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  6. Michael S. Visser & William T. Harbaugh & Naci H. Mocan, 2006. "An Experimental Test of Criminal Behavior Among Juveniles and Young Adults," NBER Working Papers 12507, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Naci Mocan & Erdal Tekin, 2006. "Ugly Criminals," NBER Working Papers 12019, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Rafael Di Tella & Sebastian Galiani & Ernesto Schargrodsky, 2006. "Crime Distribution and Victim Behavior during a Crime Wave," Working Papers 0044, CEDLAS, Universidad Nacional de La Plata. [Downloadable!]
  9. Lance Lochner, 2004. "Education, Work, and Crime: A Human Capital Approach," NBER Working Papers 10478, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. H. Naci Mocan & Erdal Tekin, 2002. "Catholic Schools and Bad Behavior: A Propensity Score Matching Analysis," NBER Working Papers 9172, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Mocan, H. Naci & Scafidi, Benjamin & Tekin, Erdal, 2002. "Catholic Schools and Bad Behavior," IZA Discussion Papers 599, Institute for the Study of Labor (IZA). [Downloadable!]
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