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Less Cash, Less Crime: Evidence from the Electronic Benefit Transfer Program

Listed author(s):
  • Wright, Richard

    ()

    (Georgia State University)

  • Tekin, Erdal

    ()

    (American University)

  • Topalli, Volkan

    ()

    (Georgia State University)

  • McClellan, Chandler

    ()

    (National Bureau of Economic Research)

  • Dickinson, Timothy

    ()

    (University of Missouri-St. Louis)

  • Rosenfeld, Richard

    ()

    (University of Missouri-St. Louis)

It has been long recognized that cash plays a critical role in fueling street crime due to its liquidity and transactional anonymity. In poor neighborhoods where street offenses are concentrated, a significant source of circulating cash stems from public assistance or welfare payments. In the 1990s, the Federal government mandated individual states to convert the delivery of their welfare program benefits from paper checks to an Electronic Benefit Transfer (EBT) system, whereby recipients received and expended their funds through debit cards. In this paper, we investigate whether the reduction in the circulation of cash on the streets associated with EBT implementation had an effect on crime. To address this question, we exploit the variation in the timing of the EBT implementation across Missouri counties. Our results indicate that the EBT program had a negative and significant effect on the overall crime rate as well as burglary, assault, and larceny. According to our point estimates, the overall crime rate decreased by 9.8 percent in response to the EBT program. We also find a negative effect on arrests, especially those associated with non-drug offenses. Interestingly, the significant drop in crime in the United States over several decades has coincided with a period of steady decline in the proportion of financial transactions involving cash. In that sense, our findings serve as a fresh contribution to the important debate surrounding the factors underpinning the great American crime decline.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 8402.

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Length: 50 pages
Date of creation: Aug 2014
Handle: RePEc:iza:izadps:dp8402
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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. Dave E. Marcotte & Sara Markowitz, 2011. "A cure for crime? Psycho‚Äźpharmaceuticals and crime trends," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 30(1), pages 29-56, December.
  4. Steven D. Levitt, 1996. "The Effect of Prison Population Size on Crime Rates: Evidence from Prison Overcrowding Litigation," The Quarterly Journal of Economics, Oxford University Press, vol. 111(2), pages 319-351.
  5. Corman, Hope & Mocan, Naci, 2005. "Carrots, Sticks, and Broken Windows," Journal of Law and Economics, University of Chicago Press, vol. 48(1), pages 235-266, April.
  6. C. Fritz Foley, 2011. "Welfare Payments and Crime," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 97-112, February.
  7. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 249-275.
  8. Donohue, John J, III & Siegelman, Peter, 1998. "Allocating Resources among Prisons and Social Programs in the Battle against Crime," The Journal of Legal Studies, University of Chicago Press, vol. 27(1), pages 1-43, January.
  9. Zhang, Junsen, 1997. "The Effect of Welfare Programs on Criminal Behavior: A Theoretical and Empirical Analysis," Economic Inquiry, Western Economic Association International, vol. 35(1), pages 120-137, January.
  10. Tim Wadsworth, 2010. "Is Immigration Responsible for the Crime Drop? An Assessment of the Influence of Immigration on Changes in Violent Crime Between 1990 and 2000," Social Science Quarterly, Southwestern Social Science Association, vol. 91(2), pages 531-553.
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