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Crime and the labor market: a search model with optimal contracts

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  • Bryan Engelhardt
  • Guillaume Rocheteau
  • Peter Rupert

Abstract

This paper extends the Pissarides (2000) model of the labor market to include crime and punishment `a 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.

Suggested Citation

  • Bryan Engelhardt & Guillaume Rocheteau & Peter Rupert, 2007. "Crime and the labor market: a search model with optimal contracts," Working Paper 0715, Federal Reserve Bank of Cleveland.
  • Handle: RePEc:fip:fedcwp:0715
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    Cited by:

    1. Engelhardt, Bryan & Fuller, David L., 2012. "Labor force participation and pair-wise efficient contracts with search and bargaining," Labour Economics, Elsevier, vol. 19(3), pages 388-402.
    2. Manolis Galenianos & Rosalie Liccardo Pacula & Nicola Persico, 2012. "A Search-Theoretic Model of the Retail Market for Illicit Drugs," Review of Economic Studies, Oxford University Press, vol. 79(3), pages 1239-1269.
    3. Neanidis, Kyriakos C. & Papadopoulou, Vea, 2013. "Crime, fertility, and economic growth: Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 91(C), pages 101-121.
    4. Masciandaro, Donato & Passarelli, Francesco, 2013. "Financial systemic risk: Taxation or regulation?," Journal of Banking & Finance, Elsevier, vol. 37(2), pages 587-596.
    5. Catalina Gómez Toro & Hermilson Velásquez & Joaquín Andrés Urrego & Juan David Valderrama, 2014. "Efecto de los Ingresos Permanentes sobre el Delito: Un Enfoque Espacial y un Caso de Aplicación," DOCUMENTOS DE TRABAJO CIEF 010900, UNIVERSIDAD EAFIT.
    6. Bryan Engelhardt & David L. Fuller, 2009. "Efficient Labor Force Participation with Search and Bargaining," Working Papers 0909, College of the Holy Cross, Department of Economics, revised Nov 2009.
    7. Thomas Bassetti & Luca Corazzini & Darwin Cortes & Luca Nunziata, 2013. "Do Immigrants Make Us Safer? A Model on Crime, Immigration and the Labor Market," "Marco Fanno" Working Papers 0121, Dipartimento di Scienze Economiche "Marco Fanno".
    8. René Cabral & André Varella Mollick & Eduardo Saucedo, 2016. "Violence in Mexico and its effects on labor productivity," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 56(2), pages 317-339, March.
    9. Syed Yasir Mahmood Gillani & Rana Ejaz Ali Khan & Abid Rashid Gill, 2011. "Unemployment and Property Crimes in Pakistan," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 1(3), pages 124-133, September.
    10. Christine Braun, 2017. "Crime and the Minimum Wage," 2017 Meeting Papers 359, Society for Economic Dynamics.
    11. Thomas Bassetti, Luca Corazzini, Darwin Cortes, 2010. "Crime, Immigration and the Labor Market: A General Equilibrium Model," ISLA Working Papers 38, ISLA, Centre for research on Latin American Studies and Transition Economies, Universita' Bocconi, Milano, Italy.
    12. Bryan Engelhardt, 2010. "The Effect of Employment Frictions on Crime," Journal of Labor Economics, University of Chicago Press, vol. 28(3), pages 677-718, July.
    13. Engelhardt, Bryan & Rocheteau, Guillaume & Rupert, Peter, 2008. "Crime and the labor market: A search model with optimal contracts," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 1876-1891, October.
    14. repec:sbe:breart:v:29:y:2009:i:2:a:3441 is not listed on IDEAS
    15. Nadia Campaniello, 2014. "Women in crime," IZA World of Labor, Institute for the Study of Labor (IZA), pages 105-105, November.
    16. Isaac Ehrlich, 2010. "The Market Model of Crime: A Short Review and New Directions," Chapters,in: Handbook on the Economics of Crime, chapter 1 Edward Elgar Publishing.
    17. Decreuse, Bruno & Mongrain, Steve & van Ypersele, Tanguy, 2015. "Property crime and private protection allocation within cities: theory and evidence," CEPR Discussion Papers 10707, C.E.P.R. Discussion Papers.
    18. Bryan Engelhardt, 2008. "The Effect of Employment Frictions on Crime: Theory and Estimation," Working Papers 0805, College of the Holy Cross, Department of Economics.
    19. Long, Iain W. & Polito, Vito, 2014. "Unemployment, Crime and Social Insurance," Cardiff Economics Working Papers E2014/9, Cardiff University, Cardiff Business School, Economics Section.
    20. Engelhardt Bryan, 2010. "Criminal Associations with Bargaining and Build Frictions," Review of Law & Economics, De Gruyter, vol. 6(2), pages 303-323, December.
    21. Bindler, Anna, 2016. "Still unemployed, what next? Crime and unemployment duration," Working Papers in Economics 660, University of Gothenburg, Department of Economics.
    22. Bethencourt, Carlos & Kunze, Lars, 2014. "On the intergenerational nature of criminal behavior," MPRA Paper 58344, University Library of Munich, Germany.
    23. Gabriele Camera & Bryan Engelhardt, 2014. "Nonmedical Prescription Drug Use: Theory and Policy Implications," Working Papers 1402, College of the Holy Cross, Department of Economics.

    More about this item

    Keywords

    Crime ; Unemployment ; Labor market;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J0 - Labor and Demographic Economics - - General
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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