Theories of crime in economics focus on the roles of deterrence and incapacitation in reducing criminal activity. In addition to deterrence, a growing body of empirical evidence has shown that both income support and employment subsidies can play a role in crime reduction. This paper extends the Becker-Ehrlich model to a standard labor supply model that includes the notion of a consumption need (Barzel and McDonald (1973)) highlights the role of substitution vs income effects when an individual chooses to engage in crime. Second, we show that whether the production of criminal activity is a substitute or a complement with the production of legitimate activity is central to the design of optimal policy. We find that both individual responsiveness to deterrence and optimal policy vary considerably with context, which is consistent with the large variation in the effect of deterrence on crime. Hence, optimal policy is a combination of deterrence, work subsidies and direct income transfers to the individual that vary with both income and location.
Authors
- Acknowledgements & Disclosure
- We thanks Ronen Avraham, Bocar Ba, Janet Curre, Ben Enke, Jeff Grogger, Murat Mungan, Nicola Persico, Mitchell Polinsky, Emmanuel Saez and the participants at the 2021 Theoretical Law and Economics Conference, Northwestern University and session participants at the 2022 Society of Labor Economics Annual meeting for helpful comments and discussions. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- DOI
- https://doi.org/10.3386/w32805
- Pages
- 48
- Published in
- United States of America
Table of Contents
- 1. Introduction 3
- 1.1. Literature 6
- 2. Labor Supply 7
- 2.1. Crime versus Leisure 7
- 2.2. Substitution Effects 13
- 2.3. Perfect Substitutes and Complements 16
- 3. Optimal Policy 17
- 3.1. Optimal Policy with Weak Labor Market 19
- 3.2. Optimal Policy when Legitimate Employment is Available 21
- 4. Discussion and Conclusion 23
- 4.1. Why Deterrence Can Be Ineffective 23
- 4.2. Dysfunctional Employment Policies 24
- 4.3. Making Deterrence More Effective 26
- 4.4. Providing Attractive Alternatives 26
- References 28
- Appendix A. Propositions, Proofs and Derivations Model of Jean Valjean Effect 32
- Deterrence as a Tax. 32
- A.1. Derivations for Section 2 34
- A.2. Derivations for Section 2.2 37
- A.3. Effect of Instruments on Criminal Labor Supply 41
- A.4. The Case of Perfect Substitutes 42
- A.5. Perfect Complements 42
- A.6. Derivations for Section (3) 44
