Does crime affect economic decisions? An empirical investigation of savings in a high-crime environment
AbstractWhile 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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Bibliographic InfoPaper provided by Department of Economics PUC-Rio (Brazil) in its series Textos para discussão with number 524.
Date of creation: May 2006
Date of revision: Oct 2008
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Crime; Economic Behavior; Savings;
Other versions of this item:
- De Mello Joao M & Zilberman Eduardo, 2008. "Does Crime Affect Economic Decisions? An Empirical Investigation of Savings in a High-Crime Environment," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-28, December.
- D00 - Microeconomics - - General - - - General
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
- Z19 - Other Special Topics - - Cultural Economics - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-06-17 (All new papers)
- NEP-GEO-2006-06-17 (Economic Geography)
- NEP-REG-2006-06-17 (Regulation)
- NEP-SOC-2006-06-17 (Social Norms & Social Capital)
- NEP-URE-2006-06-17 (Urban & Real Estate Economics)
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