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Does Crime Affect Economic Decisions? An Empirical Investigation of Savings in a High-Crime Environment

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  • De Mello Joao M

    (PUC-Rio)

  • Zilberman Eduardo

    (New York University)

Abstract

While most economic studies of crime have examined the determinants of criminal activity, this paper asks the reverse question: how does crime affect economic behavior? We study the relationship between crime and savings in the cities of São Paulo, a wealthy but crime-ridden state in Brazil. Our empirical results suggest that property crime is associated with an increase in savings. However, we do not observe a relationship between violent crime and savings, findings that are consistent with the theoretical explanation as to why crime induces thriftiness. These results are robust to an extensive sensitivity analysis that includes: 1) the inclusion of a large set of demographic covariates when examining cross-city variation; 2) accounting for city and period fixed effects when studying cross-city variation over time; 3) accounting for sample selection; and 4) splitting the sample by population size and income. We provide evidence that the association is not driven by reallocation towards bank deposits in general, which are safer assets in high-crime environments. Finally, we find a similar impact using household consumption and savings data.

Suggested Citation

  • 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.
    • Handle: RePEc:bpj:bejeap:v:8:y:2008:i:1:n:52
    DOI: 10.2202/1935-1682.1878
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    Cited by:

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    2. Mejía, Daniel & Restrepo, Pascual, 2016. "Crime and conspicuous consumption," Journal of Public Economics, Elsevier, vol. 135(C), pages 1-14.
    3. Claudio Detotto & Pulina Manuela, 2010. "Testing the effects of crime on the Italian economy," Economics Bulletin, AccessEcon, vol. 30(3), pages 2063-2074.
    4. Detotto Claudio & Vannini Marco & McCannon Bryan C., 2014. "Understanding Ransom Kidnappings and Their Duration," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 14(3), pages 1-23, July.
    5. Elissaios Papyrakis, 2013. "Environmental Performance in Socially Fragmented Countries," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 55(1), pages 119-140, May.
    6. Bruno Karoubi & Régis Chenavaz & Corina Paraschiv, 2016. "Consumers’ perceived risk and hold and use of payment instruments," Applied Economics, Taylor & Francis Journals, vol. 48(14), pages 1317-1329, March.
    7. Verteramo Chiu, Leslie J. & Turvey, Calum G., 2015. "Perception and Action in a Conflict Zone: a Study of Rural Economy and Rural Life amidst Narcos in Northeastern Mexico," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205447, Agricultural and Applied Economics Association.
    8. Singh, Prakarsh, 2011. "Impact of terrorism on investment decisions of farmers: evidence from the Punjab insurgency," MPRA Paper 33328, University Library of Munich, Germany.
    9. Rose Ann Camille C. Caliso & Jamil Paolo S. Francisco & Emmanuel M. Garcia, 2020. "Broad Insecurity and Perceived Victimization Risk," Journal of Interdisciplinary Economics, , vol. 32(2), pages 160-179, July.
    10. Sukanya Basu & Sarah Pearlman, 2017. "Violence and migration: evidence from Mexico’s drug war," IZA Journal of Migration and Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 7(1), pages 1-29, December.

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    More about this item

    JEL classification:

    • D00 - Microeconomics - - General - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • 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

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