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Crime and conspicuous consumption

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  • Mejía, Daniel
  • Restrepo, Pascual

Abstract

We study how property crime distorts consumption decisions. Using an incomplete information model, we argue that consuming conspicuous goods reveals information to criminals seeking bountiful victims and increases the likelihood of being victimized. Thus, property crime reduces the consumption of visible goods, even when these cannot be directly stolen but simply carry information about a potential victim's wealth. We exploit the large decline in property crime in the U.S. during the 90s to test this mechanism. Using data from the U.S. Consumer Expenditure Survey from 1986 to 2003, we find that households located in states experiencing sharper reductions in property crime increased significantly their consumption of visible goods, even when these goods are not generally stolen, both in absolute terms and relative to other consumption goods. Our findings hold when we instrument the decline in property crime during the 90s using a variety of strategies.

Suggested Citation

  • Mejía, Daniel & Restrepo, Pascual, 2016. "Crime and conspicuous consumption," Journal of Public Economics, Elsevier, vol. 135(C), pages 1-14.
  • Handle: RePEc:eee:pubeco:v:135:y:2016:i:c:p:1-14
    DOI: 10.1016/j.jpubeco.2015.06.004
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    Cited by:

    1. Baumann, Florian & Friehe, Tim, 2013. "Private protection against crime when property value is private information," International Review of Law and Economics, Elsevier, vol. 35(C), pages 73-79.
    2. Ms. Concha Verdugo Yepes & Mr. Peter L. Pedroni & Xingwei Hu, 2015. "Crime and the Economy in Mexican States: Heterogeneous Panel Estimates (1993-2012)," IMF Working Papers 2015/121, International Monetary Fund.
    3. Hale Utar, 2018. "Firms and Labor in Times of Violence: Evidence from the Mexican Drug War," CESifo Working Paper Series 7345, CESifo.
    4. Pengfei Jia & King Yoong Lim & Ali Raza, 2020. "Crime, different taxation, police spending and embodied human capital," Manchester School, University of Manchester, vol. 88(5), pages 664-698, September.
    5. Luisa Blanco & Robin Grier & Kevin Grier & Daniel Hicks, 2021. "Household responses to escalating violence in Mexico," Applied Economics Letters, Taylor & Francis Journals, vol. 28(4), pages 315-318, February.
    6. Friedrichsen, Jana, 2018. "Signals Sell: Product Lines when Consumers Differ Both in Taste for Quality and Image Concern," Rationality and Competition Discussion Paper Series 70, CRC TRR 190 Rationality and Competition.
    7. Fethi Klabi, 2020. "To what extent do conspicuous consumption and status consumption reinforce the effect of self-image congruence on emotional brand attachment? Evidence from the Kingdom of Saudi Arabia," Journal of Marketing Analytics, Palgrave Macmillan, vol. 8(2), pages 99-117, June.
    8. Ashby, Nathan J. & Ramos, Miguel A., 2013. "Foreign direct investment and industry response to organized crime: The Mexican case," European Journal of Political Economy, Elsevier, vol. 30(C), pages 80-91.
    9. Rosella Levaggi & Francesco Menoncin, 2016. "Dynamic tax evasion with audits based on visible consumption," Journal of Economics, Springer, vol. 119(2), pages 131-146, October.
    10. Fe, Hao & Sanfelice, Viviane, 2022. "How bad is crime for business? Evidence from consumer behavior," Journal of Urban Economics, Elsevier, vol. 129(C).

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    More about this item

    Keywords

    Crime; Conspicuous consumption; Concerns for status;
    All these keywords.

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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