Property Crime with Private Protection: A Market-for-Offenses Approach

We analyze property crime in an endowment economy composed of a large number of heterogeneous individuals who need to protect themselves, choose whether to participate in crime or not, and decide on how to allocate their predation efforts across victims. The equilibrium posits perfect foresight by all and the crime payoff clears the market between victims’ losses and criminals’ gains. We obtain that the crime payoff summarizes all the relevant information concerning the state of the crime environment as far as individual welfare is concerned. The burden of crime, expressed as losses relative to initial wealth, is evenly distributed between rich and poor individuals, inclusive of the protection effort. In absolute terms, the rich spend more on protection and lose more from crime. We derive a necessary and sufficient under which wealth redistribution increases crime. Under a weak sufficient condition, economic development tends to reduce the burden of crime for all, regardless of how its fruits are distributed. The predictions of the model accord well with existing empirical results