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Does crime affect economic decisions? An empirical investigation of savings in a high-crime environment

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Author Info
João Manoel Pinho de Mello () (Department of Economics PUC-Rio.)
Eduardo Zilberman () (Department of Economics, New York University)

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Abstract

While most economic studies of crime have focused on its determinants, we study the reverse question: does crime affect economic behavior? Being such an important social phenomenon, one would expect crime to affect economic decisions. Using local data on crime rates and savings per capita in a high-crime environment, we document a striking empirical relationship: crime induces savings. Our paper is one of the first to successfully relate crime to an economic outcome. This result is robust to an extensive sensitivity analysis, which include: 1) controlling to a large set of demographic covariates; 2) accounting for the fact that crime and savings may be determined jointly; 3) measuring savings in different ways; 4) accounting for the presence of possible outliers; 5) weighting the data according to population; 6) accounting for spatial correlation; and, finally, 7) estimating the model for different sub-samples of cities. Our estimates indicate that only property, not violent, crime induces savings, which is consistent with the theoretical explanations on why crime would increase thriftiness

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Publisher Info
Paper provided by Department of Economics PUC-Rio (Brazil) in its series Textos para discussão with number 524.

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Length: 31p.
Date of creation: May 2006
Date of revision: Oct 2008
Handle: RePEc:rio:texdis:524

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Related research
Keywords: Crime; Economic Behavior; Savings;

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Find related papers by JEL classification:
D00 - Microeconomics - - General - - - General
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
R11 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Analysis of Growth, Development, and Changes
Z19 - Other Special Topics - - Cultural Economics - - - Other

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Lance Lochner, 2004. "Education, Work, And Crime: A Human Capital Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(3), pages 811-843, 08. [Downloadable!] (restricted)
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  2. Kenneth Burdett & Ricardo Lagos & Randall Wright, 2003. "Crime, Inequality, and Unemployment," American Economic Review, American Economic Association, vol. 93(5), pages 1764-1777, December. [Downloadable!]
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  3. Besley, Timothy, 1995. "Property Rights and Investment Incentives: Theory and Evidence from Ghana," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 903-37, October. [Downloadable!] (restricted)
  4. Demombynes, Gabriel & Ozler, Berk, 2002. "Crime and local inequality in South Africa," Policy Research Working Paper Series 2925, The World Bank. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ciro Biderman & João Manoel Pinho de Mello & Alexandre A Schneider, 2006. "Dry law and homicides: evidence from the São Paulo metropolitan area," Textos para discussão 518, Department of Economics PUC-Rio (Brazil), revised Oct 2008. [Downloadable!]
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