Decomposing the Societal Opportunity Costs of Property Crime

Compton, Andrew (2019): Decomposing the Societal Opportunity Costs of Property Crime.

Abstract

In this paper, I explore how property crime can affect static and dynamic general equilibrium behavior of households and firms. I calibrate a model with a representative firm and heterogeneous households where households have the choice to commit property crime. In contrast to previous literature, I treat crime as a transfer rather than home production. This creates a feedback loop wherein negative productivity shocks increase property crime which further depresses legitimate work and capital accumulation. These responses by households are particularly important when thinking about the effect of property crime on the economy. Household and firm losses account for 24% of compensating variation (CV) and 37% of lost production. This suggests that behavioral responses are quite important when calculating the cost of property crime. Finally, on the margin, decreasing property crime by 1\% increases social welfare by 0.19%, but the effect is diminishing suggesting that reducing crime entirely may not be optimal from a policymakers perspective.

• Item Type: MPRA Paper
• Language: English
• Keywords: Crime, Welfare, Police, Public Goods, Business Cycles
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E26 - Informal Economy ; Underground Economy; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; H - Public Economics > H4 - Publicly Provided Goods > H41 - Public Goods; K - Law and Economics > K1 - Basic Areas of Law

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