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Job Loss, Credit, and Crime in Colombia†

Job Loss, Credit, and Crime in Colombia† AbstractWe investigate the effects of job displacement, as a result of mass layoffs, on criminal arrests using a matched employer-employee crime dataset from Medellín, Colombia. Job displacement leads to immediate and persistent earnings losses and higher probability of arrest for both the displaced worker and family members. Leveraging a banking policy reform, we find that greater access to credit attenuates the criminal response to job loss. Impacts on arrests are pronounced for property crimes and among younger men for whom opportunities in criminal enterprises are prevalent. Taken together, our results are consistent with economic incentives contributing to criminal participation decisions after job losses. (JEL G21, G51, J63, K42, O16, O17) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Review Insights American Economic Association

Job Loss, Credit, and Crime in Colombia†

AER: Insights 2021, 3(1): 97–114 https://doi.org/10.1257/aeri.20190547 By Gaurav Khanna, Carlos Medina, Anant Nyshadham, Christian Posso, and Jorge Tamayo* We investigate the effects of job displacement, as a result of mass layoffs, on criminal arrests using a matched employer -employee crime dataset from Medellín, Colombia. Job displacement leads to immediate and persistent earnings losses and higher probability of arrest for both the displaced worker and family members. Leveraging a banking policy reform, we find that greater access to credit atten- uates the criminal response to job loss. Impacts on arrests are pro- nounced for property crimes and among younger men for whom opportunities in criminal enterprises are prevalent. Taken together, our results are consistent with economic incentives contributing to criminal participation decisions after job losses. (JEL G21, G51, J63, K42, O16, O17) Job losses have been shown to have substantial impacts on the lives of individ- uals, from reductions in long-run earnings and emplo yability (Jacobson, LaLonde, and  Sullivan 1993; Couch and  Placzek 2010) to depression and deterioration of health and well-being Black, De ( vereux, and  Salvanes 2015; Del  Bono, Weber, and  Winter-Ebmer 2012; Sullivan and  Von  Wachter 2009; Charles and  Stephens 2004; Aghion et  al. 2016). These effects could lead to increases in criminality. Indeed, empirical studies of crime document criminal response to both economic incentives (Bignon, Caroli, and Galbiati 2017; Watson, Guettabi, and Reimer forth- coming; Blattman and  Annan 2016) and a myriad of other behavioral and psy- chological conditions (Blattman, Jamison, and  Sheridan 2017; Bondurant, Lindo, and Swensen 2018; Anderson, Cesur, and Tekin 2015; Lindo, Siminski, and Swensen 2018; Carpenter 2005). Many low- and middle-income countries, particularly across Latin America, suffer from a...
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Publisher
American Economic Association
Copyright
Copyright © 2021 © American Economic Association
ISSN
2640-205X
eISSN
2640-2068
DOI
10.1257/aeri.20190547
Publisher site
See Article on Publisher Site

Abstract

AbstractWe investigate the effects of job displacement, as a result of mass layoffs, on criminal arrests using a matched employer-employee crime dataset from Medellín, Colombia. Job displacement leads to immediate and persistent earnings losses and higher probability of arrest for both the displaced worker and family members. Leveraging a banking policy reform, we find that greater access to credit attenuates the criminal response to job loss. Impacts on arrests are pronounced for property crimes and among younger men for whom opportunities in criminal enterprises are prevalent. Taken together, our results are consistent with economic incentives contributing to criminal participation decisions after job losses. (JEL G21, G51, J63, K42, O16, O17)

Journal

American Economic Review InsightsAmerican Economic Association

Published: Mar 1, 2021

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