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Unemployment and Gang Crime: Could Prosperity Backfire?

Author

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  • Poutvaara, Panu

    () (University of Munich)

  • Priks, Mikael

    () (University of Munich)

Abstract

Empirical evidence reveals that unemployment tends to increase property crime but that it has no effect on violent crime. To explain these facts, we examine a model of criminal gangs and suggest that there is a substitution effect between property crime and violent crime at work. In the model, non-monetary valuation of gang membership is private knowledge. Thus the leaders face a trade-off between less crime per member in large gangs and more crime per member in small gangs. Unemployment increases the relative attractiveness of large and less violent gangs engaging more in property crime.

Suggested Citation

  • Poutvaara, Panu & Priks, Mikael, 2007. "Unemployment and Gang Crime: Could Prosperity Backfire?," IZA Discussion Papers 2710, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp2710
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    References listed on IDEAS

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    1. Steven D. Levitt, 2004. "Understanding Why Crime Fell in the 1990s: Four Factors that Explain the Decline and Six that Do Not," Journal of Economic Perspectives, American Economic Association, vol. 18(1), pages 163-190, Winter.
    2. Raphael, Steven & Winter-Ember, Rudolf, 2001. "Identifying the Effect of Unemployment on Crime," Journal of Law and Economics, University of Chicago Press, vol. 44(1), pages 259-283, April.
    3. Abdala Mansour & Nicolas Marceau & Steeve Mongrain, 2006. "Gangs and Crime Deterrence," Journal of Law, Economics, and Organization, Oxford University Press, vol. 22(2), pages 315-339, October.
    4. George A. Akerlof & Rachel E. Kranton, 2000. "Economics and Identity," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 715-753.
    5. Steven D. Levitt & Sudhir Alladi Venkatesh, 2000. "An Economic Analysis of a Drug-Selling Gang's Finances," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 755-789.
    6. Stergios Skaperdas, 2001. "The political economy of organized crime: providing protection when the state does not," Economics of Governance, Springer, vol. 2(3), pages 173-202, November.
    7. Konrad, Kai A. & Skaperdas, Stergios, 1997. "Credible threats in extortion," Journal of Economic Behavior & Organization, Elsevier, vol. 33(1), pages 23-39, May.
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    Cited by:

    1. Denis Fougère & Francis Kramarz & Julien Pouget, 2009. "Youth Unemployment and Crime in France," Journal of the European Economic Association, MIT Press, vol. 7(5), pages 909-938, September.
    2. Seals, Richard Alan & Stern, Liliana V., 2013. "Cognitive ability and the division of labor in urban ghettos: Evidence from gang activity in U.S. data," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 44(C), pages 140-149.
    3. Robert Dur & Joël Van Der Weele, 2013. "Status-Seeking in Criminal Subcultures and the Double Dividend of Zero-Tolerance," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 15(1), pages 77-93, February.
    4. Amegashie, J. Atsu & Ouattara, Bazoumanna & Strobl, Eric, 2007. "Moral Hazard and the Composition of Transfers: Theory with an Application to Foreign Aid," MPRA Paper 3158, University Library of Munich, Germany, revised 06 May 2007.
    5. Almén, Daniel & Nordin, Martin, 2011. "Long term unemployment and violent crimes - using post-2000 data to reinvestigate the relationship between unemployment and crime," Working Papers 2011:34, Lund University, Department of Economics.

    More about this item

    Keywords

    unemployment; gangs; crime; violence; identity;

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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