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Local Labor Market Conditions and Crime: Evidence from the Brazilian Trade Liberalization

Author

Listed:
  • Dix-Carneiro, Rafael

    (Duke University)

  • Soares, Rodrigo R.

    (Insper, São Paulo)

  • Ulyssea, Gabriel

    (University College London)

Abstract

This paper estimates the effect of local labor market conditions on crime in a developing country with high crime rates. Contrary to the previous literature, which has focused exclusively on developed countries with relatively low crime rates, we find that labor market conditions have a strong effect on homicides. We exploit the 1990s trade liberalization in Brazil as a natural experiment generating exogenous shocks to local labor demand. Regions facing more negative shocks experience large relative increases in crime rates in the medium term, but these effects virtually disappear in the long term. This pattern mirrors the labor market responses to the trade shocks. Using the trade liberalization episode to design an instrumental variables strategy, we find that a 10% reduction in expected labor market earnings (employment rate × earnings) leads to a 39% increase in homicide rates. Our results highlight an additional dimension of adjustment costs following trade shocks that has so far been overlooked in the literature.

Suggested Citation

  • Dix-Carneiro, Rafael & Soares, Rodrigo R. & Ulyssea, Gabriel, 2016. "Local Labor Market Conditions and Crime: Evidence from the Brazilian Trade Liberalization," IZA Discussion Papers 9638, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp9638
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    References listed on IDEAS

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    Cited by:

    1. Laura Chioda, 2017. "Stop the Violence in Latin America," World Bank Publications - Books, The World Bank Group, number 25920, December.
    2. Hirata, Guilherme & Soares, Rodrigo R., 2016. "Competition and the Racial Wage Gap: Testing Becker's Model of Employer Discrimination," IZA Discussion Papers 9764, Institute of Labor Economics (IZA).
    3. Nishijima, Marislei & Pal, Sarmistha, 2020. "Do Compulsory Schooling Laws Always Work? A Study of Youth Crime in Brazilian Municipalities," IZA Discussion Papers 13097, Institute of Labor Economics (IZA).
    4. Jorge Alvarez & Felipe Benguria & Niklas Engbom & Christian Moser, 2018. "Firms and the Decline in Earnings Inequality in Brazil," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(1), pages 149-189, January.
    5. Deiana, C, 2016. "Local Labour Market Effects of Unemployment on Crime Induced by Trade Shocks," Economics Discussion Papers 16529, University of Essex, Department of Economics.
    6. Lastauskas, Povilas & Tatsi, Eirini, 2017. "Spatial Nexus in Crime and Unemployment in Times of Crisis," Working Paper Series 2/2017, Stockholm University, Swedish Institute for Social Research.
    7. Mindaugas Butkus & Kristina Matuzevièi?t? & Alma Maèiulyt?-Šniukien?, 2019. "Do Economic Conditions Still Cause Crime? Some Comforting Empirical Evidences from EU Panel," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 37(2), pages 603-628.

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    More about this item

    Keywords

    trade liberalization; crime; labor markets;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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