Economic shocks and crime: Evidence from the crash of Ponzi schemes

Darwin Cortés, Julieth Santamaria and Juan Vargas

Journal of Economic Behavior & Organization, 2016, vol. 131, issue PA, 263-275

Abstract: In November 2008, Colombian authorities dismantled a network of Ponzi schemes, making hundreds of thousands of investors lose tens of millions of dollars throughout the country. Using original data on the geographical incidence of the Ponzi schemes, this paper estimates the impact of their breakdown on crime. We find that the crash of Ponzi schemes differentially exacerbated crime in affected districts. Confirming the intuition of the standard economic model of crime, this effect is only present in places with relatively weak judicial and law enforcement institutions, and with little access to consumption smoothing mechanisms such as microcredit. In addition, we show that, with the exception of economically-motivated felonies such as robbery, violent crime is not affected by the negative shock.

Keywords: Ponzi schemes; Economic shocks; Property crime; Colombia (search for similar items in EconPapers)
JEL-codes: G01 N26 P46 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Related works:
Working Paper: Economic Shocks and Crime: Evidence from the Crash of Ponzi Schemes (2016)
Working Paper: Economic Shocks and Crime: Evidence from the Crash of Ponzi Schemes (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:131:y:2016:i:pa:p:263-275

DOI: 10.1016/j.jebo.2016.07.024

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