Local Labor Market Conditions and Crime: Evidence from the Brazilian Trade Liberalization

Rafael Dix-Carneiro, Rodrigo Soares and Gabriel Ulyssea ()

No 9638, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper estimates the effect of local labor market conditions on crime in a developing country with high crime rates. Contrary to the previous literature, which has focused exclusively on developed countries with relatively low crime rates, we find that labor market conditions have a strong effect on homicides. We exploit the 1990s trade liberalization in Brazil as a natural experiment generating exogenous shocks to local labor demand. Regions facing more negative shocks experience large relative increases in crime rates in the medium term, but these effects virtually disappear in the long term. This pattern mirrors the labor market responses to the trade shocks. Using the trade liberalization episode to design an instrumental variables strategy, we find that a 10% reduction in expected labor market earnings (employment rate × earnings) leads to a 39% increase in homicide rates. Our results highlight an additional dimension of adjustment costs following trade shocks that has so far been overlooked in the literature.

Keywords: trade liberalization; crime; labor markets (search for similar items in EconPapers)
JEL-codes: F16 J23 J24 K42 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2016-01
New Economics Papers: this item is included in nep-int, nep-lam, nep-law and nep-lma
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Published - published in: American Economic Journal: Applied Economics, 2018, 10 (4), 158-195

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