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Crime and the Labor Market in a Search Model with Pairwise-Efficient Separations

  • Engelhardt, Bryan
  • Rocheteau, Guillaume
  • Rupert, Peter

This paper extends the Pissarides (2000) model of the labor market to include crime and punishment à la Becker (1968). All workers, irrespective of their labor force status can commit crimes and the employment contract is determined optimally. The model is used to study, analytically and quantitatively, the effects of various labor market and crime policies. For instance, a more generous unemployment insurance system reduces the crime rate of the unemployed but its effect on the crime rate of the employed depends on job duration and jail sentences. When the model is calibrated to U.S. data, the overall effect on crime is positive but quantitatively small. Wage subsidies reduce unemployment and crime rates of employed and unemployed workers, and improve society's welfare. Hiring subsidies reduce unemployment but they can raise the crime rate of employed workers. Crime policies (police technology and jail sentences) affect crime rates significantly but have only negligible effects on the labor market.

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Paper provided by Department of Economics, UC Santa Barbara in its series University of California at Santa Barbara, Economics Working Paper Series with number qt72r6g75d.

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Date of creation: 01 Aug 2007
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Handle: RePEc:cdl:ucsbec:qt72r6g75d
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  1. Joseph A. Ritter & Lowell J. Taylor, 1997. "Economic models of employee motivation," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 3-21.
  2. Marcus Hagedorn & Iourii Manovskii, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," 2005 Meeting Papers 460, Society for Economic Dynamics.
  3. Christopher A. Pissarides, 1992. "Loss of Skill During Unemployment and the Persistence of Employment Shocks," The Quarterly Journal of Economics, Oxford University Press, vol. 107(4), pages 1371-1391.
  4. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  5. Christopher A. Pissarides, 1994. "Search Unemployment with On-the-job Search," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 457-475.
  6. Holmlund, B., 1997. "Unemployment Insurance in Theory and Practice," CEPR Discussion Papers 380, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  7. Grogger, Jeff, 1998. "Market Wages and Youth Crime," Journal of Labor Economics, University of Chicago Press, vol. 16(4), pages 756-91, October.
  8. Stephen Machin & Costas Meghir, 2004. "Crime and Economic Incentives," Journal of Human Resources, University of Wisconsin Press, vol. 39(4).
  9. Olivier Marie & Stephen Machin, 2004. "Crime And Benefit Cuts," Royal Economic Society Annual Conference 2004 134, Royal Economic Society.
  10. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 19 pages.
  11. Bedard, Kelly & Helland, Eric, 2004. "The location of women's prisons and the deterrence effect of "harder" time," International Review of Law and Economics, Elsevier, vol. 24(2), pages 147-167, June.
  12. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  13. Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 279-298.
  14. Hoon, H.T. & Phelps, E.S., 1998. "Low-Wage Employment Subsidies in a Labor-Turnover Model of the 'Natural Rate'," Papers 98-004, Indiana - Center for Econometric Model Research.
  15. 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.
  16. E. Paul Durrenberger, 2005. "Labour," Chapters, in: A Handbook of Economic Anthropology, chapter 8 Edward Elgar Publishing.
  17. Bonilla Roberto & Burdett Kenneth, 2010. "On-the-Job Search and Labor Market Equilibrium," The B.E. Journal of Macroeconomics, De Gruyter, vol. 10(1), pages 1-28, March.
  18. Ken Burdett & Melvyn Coles, 2003. "Equilibrium Wage-Tenure Contracts," Econometrica, Econometric Society, vol. 71(5), pages 1377-1404, 09.
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