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

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Listed:
  • Richard Wright
  • Erdal Tekin
  • Volkan Topalli
  • Chandler McClellan
  • Timothy Dickinson
  • Richard Rosenfeld

Abstract

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 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 examine 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. EBT implementation had no effect on rape, a crime that is unlikely to be motivated by the acquisition of cash. 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.

Suggested Citation

  • Richard Wright & Erdal Tekin & Volkan Topalli & Chandler McClellan & Timothy Dickinson & Richard Rosenfeld, 2014. "Less Cash, Less Crime: Evidence from the Electronic Benefit Transfer Program," NBER Working Papers 19996, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:19996
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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. 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. Armey, Laura E. & Lipow, Jonathan & Webb, Natalie J., 2014. "The impact of electronic financial payments on crime," Information Economics and Policy, Elsevier, vol. 29(C), pages 46-57.
    10. 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.
    11. 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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    Cited by:

    1. World Bank [WB], 2018. "The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution," Working Papers id:12735, eSocialSciences.
    2. repec:ces:ifodic:v:12:y:2014:i:2:p:19126473 is not listed on IDEAS
    3. Erdal Tekin & Volkan Topalli & Chandler McClellan & Richard Wright, 2014. "Liquidating Crime with Illiquidity: How Switching from Cash to Credit Can Stop Street Crime," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 12(2), pages 45-50, October.
    4. repec:iza:izawol:journl:2017:n:396 is not listed on IDEAS
    5. repec:wbk:wbpubs:29510 is not listed on IDEAS
    6. repec:oup:wbrobs:v:32:y:2017:i:2:p:211-226. is not listed on IDEAS

    More about this item

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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