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Does crime affect economic decisions? An empirical investigation of savings in a high-crime environment

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Abstract

While most economic studies of crime have focused on its determinants, we study the reverse question: does crime affect economic behavior? Being such an important social phenomenon, one would expect crime to affect economic decisions. Using local data on crime rates and savings per capita in a high-crime environment, we document a striking empirical relationship: crime induces savings. Our paper is one of the first to successfully relate crime to an economic outcome. This result is robust to an extensive sensitivity analysis, which include: 1) controlling to a large set of demographic covariates; 2) accounting for the fact that crime and savings may be determined jointly; 3) measuring savings in different ways; 4) accounting for the presence of possible outliers; 5) weighting the data according to population; 6) accounting for spatial correlation; and, finally, 7) estimating the model for different sub-samples of cities. Our estimates indicate that only property, not violent, crime induces savings, which is consistent with the theoretical explanations on why crime would increase thriftiness

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  • João Manoel Pinho de Mello & Eduardo Zilberman, 2006. "Does crime affect economic decisions? An empirical investigation of savings in a high-crime environment," Textos para discussão 524, Department of Economics PUC-Rio (Brazil), revised Oct 2008.
  • Handle: RePEc:rio:texdis:524
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    1. Rony Pshisva & Gustavo A. Suárez F., 2006. "Captive Markets: the Impact of Kidnappings on Corporate Investment in Colombia," COYUNTURA ECONÓMICA, FEDESARROLLO, June.
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    Cited by:

    1. Bruno Karoubi & Régis Chenavaz & Corina Paraschiv, 2016. "Consumers’ perceived risk and hold and use of payment instruments," Applied Economics, Taylor & Francis Journals, vol. 48(14), pages 1317-1329, March.
    2. repec:spr:izamig:v:7:y:2017:i:1:d:10.1186_s40176-017-0102-6 is not listed on IDEAS
    3. Mejía, Daniel & Restrepo, Pascual, 2016. "Crime and conspicuous consumption," Journal of Public Economics, Elsevier, vol. 135(C), pages 1-14.
    4. Detotto Claudio & Vannini Marco & McCannon Bryan C., 2014. "Understanding Ransom Kidnappings and Their Duration," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 14(3), pages 1-23, July.
    5. Elissaios Papyrakis, 2013. "Environmental Performance in Socially Fragmented Countries," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 55(1), pages 119-140, May.
    6. Verteramo Chiu, Leslie J. & Turvey, Calum G., 2015. "Perception and Action in a Conflict Zone: a Study of Rural Economy and Rural Life amidst Narcos in Northeastern Mexico," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205447, Agricultural and Applied Economics Association;Western Agricultural Economics Association.
    7. Singh, Prakarsh, 2011. "Impact of terrorism on investment decisions of farmers: evidence from the Punjab insurgency," MPRA Paper 33328, University Library of Munich, Germany.

    More about this item

    Keywords

    Crime; Economic Behavior; Savings;

    JEL classification:

    • D00 - Microeconomics - - General - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • Z19 - Other Special Topics - - Cultural Economics - - - Other

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