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Breaking Bad: How Health Shocks Prompt Crime

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  • Andersen, Steffen
  • Parise, Gianpaolo
  • Peijnenburg, Kim

Abstract

We explore the impact of health shocks on criminal behavior. Exploiting variations in the timing of cancer diagnoses, we find that health shocks elicit an increase in the probability of committing crime by 13%. This response is economically significant at both the extensive (first-time criminals) and intensive margin (reoffenders). We uncover evidence for two channels explaining our findings. First, diagnosed individuals seek illegal revenues to compensate for the loss of earnings on the legal labor market. Second, cancer patients face lower expected cost of punishment through a lower survival probability. We do not find evidence that changes in preferences explain our findings. The documented pattern is stronger for individuals who lack insurance through preexisting wealth, home equity, or marriage. Welfare programs that alleviate the economic repercussions of health shocks are effective at mitigating the ensuing negative externality on society.

Suggested Citation

  • Andersen, Steffen & Parise, Gianpaolo & Peijnenburg, Kim, 2021. "Breaking Bad: How Health Shocks Prompt Crime," CEPR Discussion Papers 15899, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:15899
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    Cited by:

    1. Hebous, Shafik & Jia, Zhiyang & Løyland, Knut & Thoresen, Thor O. & Øvrum, Arnstein, 2023. "Do Audits Improve Future Tax Compliance in the Absence of Penalties? Evidence from Random Audits in Norway," Journal of Economic Behavior & Organization, Elsevier, vol. 207(C), pages 305-326.

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    Keywords

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    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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