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Local Banking Market Frictions and Youth Crime: Evidence from Bank Failures

Amit Ghosh () and Salvador Contreras ()
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Amit Ghosh: Texas A&M International University
Salvador Contreras: The University of Texas Rio Grande Valley

Journal of Financial Services Research, 2022, vol. 61, issue 1, No 2, 43-75

Abstract: Abstract This paper examines the impact of local banking market frictions measured by bank failures on youth crime. Using a difference-in-differences framework, we find white and black youth violent crimes increase by 0.11 and 0.66 per 1000 people, respectively, following a bank failure. Further, we find white property crime, petty delinquency and drug crime increase by 0.29, 0.75 and 0.35 per 1000 people. Black youth see a rise in drug crimes by 0.88 per 1000 people. Results by gender reveal male drug crimes rise by 2.4 and female property crimes by 0.66 per 1000 people, respectively. The economic effects are most persistent for petty delinquency crimes committed by white youths. Furthermore, we find evidence that bank failures worsen local labor markets conditions by increasing white youth unemployment and reduce employment in the limited-services restaurant industry; channels that likely alter the opportunity cost of youth crime.

Keywords: bank failures; county-level analysis; criminal motivational effect theory; rational choice theory; youth crime; youth employment (search for similar items in EconPapers)
JEL-codes: G21 H0 R11 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s10693-021-00370-z

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