IDEAS home Printed from https://ideas.repec.org/a/bpj/bejeap/v8y2008i1n52.html
   My bibliography  Save this article

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://www.degruyter.com/view/j/bejeap.2008.8.1/bejeap.2008.8.1.1878/bejeap.2008.8.1.1878.xml?format=INT
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Richard B. Freeman & William M. Rodgers III, 1999. "Area Economic Conditions and the Labor Market Outcomes of Young Men in the 1990s Expansion," NBER Working Papers 7073, National Bureau of Economic Research, Inc.
    2. Martin Browning & Annamaria Lusardi, 1996. "Household Saving: Micro Theories and Micro Facts," Journal of Economic Literature, American Economic Association, vol. 34(4), pages 1797-1855, December.
    3. S. Brock Blomberg & Gregory D. Hess, 2006. "How Much Does Violence Tax Trade?," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 599-612, November.
    4. Rony Pshisva & Gustavo A. Suárez F., 2006. "Captive Markets: the Impact of Kidnappings on Corporate Investment in Colombia," COYUNTURA ECONÓMICA, FEDESARROLLO, June.
    5. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters,in: Essays in the Economics of Crime and Punishment, pages 1-54 National Bureau of Economic Research, Inc.
    6. Ana Carla A. Costa & João M. P. De Mello, 2008. "Judicial Risk and Credit Market Performance: Micro Evidence from Brazilian Payroll Loans," NBER Chapters,in: Financial Markets Volatility and Performance in Emerging Markets, pages 155-184 National Bureau of Economic Research, Inc.
    7. Rony Pshisva & Gustavo A. Suarez, 2006. "'Captive markets': the impact of kidnappings on corporate investment in Colombia," Finance and Economics Discussion Series 2006-18, Board of Governors of the Federal Reserve System (U.S.).
    8. Abadie, Alberto & Dermisi, Sofia, 2008. "Is terrorism eroding agglomeration economies in Central Business Districts? Lessons from the office real estate market in downtown Chicago," Journal of Urban Economics, Elsevier, vol. 64(2), pages 451-463, September.
    9. H. Naci Mocan & Hope Corman, 2000. "A Time-Series Analysis of Crime, Deterrence, and Drug Abuse in New York City," American Economic Review, American Economic Association, vol. 90(3), pages 584-604, June.
    10. Ana Carla A. Costa & João M. P. de Mello, 2006. "Judicial Risk and Credit Market Performance: Micro Evidence from Brazil Payroll Loans," Working Papers Series 102, Central Bank of Brazil, Research Department.
    11. Julie Berry Cullen & Steven D. Levitt, 1999. "Crime, Urban Flight, And The Consequences For Cities," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 159-169, May.
    12. 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, August.
    13. Soares, Rodrigo R., 2006. "The welfare cost of violence across countries," Journal of Health Economics, Elsevier, vol. 25(5), pages 821-846, September.
    14. Edwards, Sebastian, 1996. "Why are Latin America's savings rates so low? An international comparative analysis," Journal of Development Economics, Elsevier, vol. 51(1), pages 5-44, October.
    15. Demombynes, Gabriel & Ozler, Berk, 2005. "Crime and local inequality in South Africa," Journal of Development Economics, Elsevier, vol. 76(2), pages 265-292, April.
    16. Christiano A. Coelho & João Manoel Pinho de Mello & Leonardo Rezende, 2007. "Are Public Banks pro-Competitive? Evidence from Concentrated Local Markets in Brazil," Textos para discussão 551, Department of Economics PUC-Rio (Brazil), revised Sep 2007.
    17. Deininger,Klaus W., 2003. "Causes and consequences of civil strife - micro-level evidence from Uganda," Policy Research Working Paper Series 3045, The World Bank.
    18. Edward L. Glaeser & Bruce Sacerdote, 1999. "Why Is There More Crime in Cities?," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages 225-258, December.
    19. Lusardi, Annamaria, 1998. "On the Importance of the Precautionary Saving Motive," American Economic Review, American Economic Association, vol. 88(2), pages 449-453, May.
    20. Rafael Di Tella & Ernesto Schargrodsky, 2004. "Do Police Reduce Crime? Estimates Using the Allocation of Police Forces After a Terrorist Attack," American Economic Review, American Economic Association, vol. 94(1), pages 115-133, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    2. repec:spr:izamig:v:7:y:2017:i:1:d:10.1186_s40176-017-0102-6 is not listed on IDEAS
    3. Mejía, Daniel & Restrepo, Pascual, 2016. "Crime and conspicuous consumption," Journal of Public Economics, Elsevier, vol. 135(C), pages 1-14.
    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. 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;Western Agricultural Economics Association.
    7. Singh, Prakarsh, 2011. "Impact of terrorism on investment decisions of farmers: evidence from the Punjab insurgency," MPRA Paper 33328, University Library of Munich, Germany.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:bejeap:v:8:y:2008:i:1:n:52. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla). General contact details of provider: https://www.degruyter.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.