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

Joao De Mello and Eduardo Zilberman

No 524, Textos para discussão from Department of Economics PUC-Rio (Brazil)

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

Keywords: Crime; Economic Behavior; Savings (search for similar items in EconPapers)
JEL-codes: D00 D91 R11 Z19 (search for similar items in EconPapers)
Pages: 31p.
Date: 2006-05, Revised 2008-10
New Economics Papers: this item is included in nep-geo, nep-reg, nep-soc and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Journal Article: Does Crime Affect Economic Decisions? An Empirical Investigation of Savings in a High-Crime Environment (2008)
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