Illicit Income and Victimization Risk: Evidence on Compensating Wage Differentials

Thomas A. Loughran and Greg Midgette

Journal of Institutional and Theoretical Economics (JITE), 2025, vol. 181, issue 1, 110-132

Abstract: While the criminological decision-making literature has primarily focused on risk in terms of detection or apprehension, it is merely one component of an individual's risk calculus. Making money in the illicit market carries more inherent risks than making money in the legal market, including mortality, injury and other types of victimization. Using panel data on individuals who report both illicit earnings and incidence of violent victimization and arrest, we first calculate monetary premiums associated with increased victimization risks to illicit activities. Second, we test if this depends on perceived opportunities. We hypothesize that this level of acceptability in risk in terms of violent victimization is related to one's perceived legitimate opportunities.

Keywords: risk; victimization; illegal income; compensating differentials (search for similar items in EconPapers)
JEL-codes: K42 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1628/jite-2025-0002

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