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Illicit Income and Victimization Risk: Evidence on Compensating Wage Differentials

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  • Thomas A. Loughran
  • Greg Midgette

Abstract

While the criminological decision-making literature has primarily focused on risk in terms of detection or apprehension, it is merely one component of an individual's risk calculus. Making money in the illicit market carries more inherent risks than making money in the legal market, including mortality, injury and other types of victimization. Using panel data on individuals who report both illicit earnings and incidence of violent victimization and arrest, we first calculate monetary premiums associated with increased victimization risks to illicit activities. Second, we test if this depends on perceived opportunities. We hypothesize that this level of acceptability in risk in terms of violent victimization is related to one's perceived legitimate opportunities.

Suggested Citation

  • Thomas A. Loughran & Greg Midgette, 2025. "Illicit Income and Victimization Risk: Evidence on Compensating Wage Differentials," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 181(1), pages 110-132.
    • Handle: RePEc:mhr:jinste:urn:doi:10.1628/jite-2025-0002
    DOI: 10.1628/jite-2025-0002
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    More about this item

    Keywords

    risk; victimization; illegal income; compensating differentials;
    All these keywords.

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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