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Economics of Crime

Paper Session

Saturday, Jan. 7, 2017 7:30 PM – 9:30 PM

Hyatt Regency Chicago, Atlanta
Hosted By: American Economic Association
  • Chair: Philip Cook, Duke University

The Impact of United States Deportation of Criminals on the Establishment of Gangs and Youth Education in El Salvador

Priti Kalsi
,
California State University-Chico

Abstract

Exploiting a change in American immigration policy that increased deportations of criminals and introduced U.S.-based gangs to El Salvador, I study the impact of the expansion of U.S.-based gangs on gender-specific education accumulation in El Salvador. I identify regions with high U.S.-based gang presence by locating areas exhibiting a large decline in homicides after a recent truce between two major U.S.-based gangs. I show that these areas became disproportionately more violent as more criminals were deported from the United States to El Salvador. Using variation in both timing of American policy and gang intensity within a location, I estimate a difference-in-differences model to study the impact of increased gang exposure on children's education. I find that the establishment of gangs hinders basic education (comparable to U.S. grades 1-9) attainment for boys. The results for girls are weaker and mostly statistically indistinguishable from zero. Age-specific analysis reveals that exposure to gangs starts to negatively impact boys' schooling in their pre-teen years. I find that trends in education only shift following the American deportation policy, and that only children who were young at the time of the policy exhibit lower education completion, while individuals who were old enough to have completed their schooling are not impacted. I further argue that the results are not driven by selective migration within El Salvador or abroad. Finally, the mechanism explaining the results in this paper appears to be exposure to gangs and not just high rates of violence. I do not find evidence suggesting that boys joining gangs explain the effects. Instead, a potential mechanism is that boys in gang areas increase employment perhaps in response to gangs' extortion practices. Another mechanism that I am unable to rule out is that the option of gang membership reduces returns from schooling for boys.

Industrial Espionage and Productivity

Erik Meyersson
,
Stockholm School of Economics
Albrecht Glitz
,
Pompeu Fabra University

Abstract

In this paper, we investigate the economic returns to industrial espionage by linking information from East Germany's foreign intelligence service to sector-specific gaps in total factor productivity (TFP) between West and East Germany. Based on a data set that comprises the entire flow of information provided by East German informants over the period 1968-1989, we document a significant narrowing of sectoral West-to-East TFP gaps as a result of East Germany's industrial espionage. This central finding holds across a wide range of specifications and is robust to the inclusion of several alternative proxies for technology transfer. We further demonstrate that the economic returns to industrial espionage are primarily driven by relatively few high quality pieces of information and particularly strong in sectors that were closer to the West German technological frontier. Our findings also show that, over the time period considered, industrial espionage crowded out standard overt R&D in East Germany.

The Role of Gun Supply in 1980s and 1990s Youth Violence

Geoffrey Fain Williams
,
Transylvania University
Wm Alan Bartley
,
Transylvania University

Abstract

Youth violence, particularly among young black males, particularly in urban areas, increased radically in the late 1980s and early 1990s and then began to fall. The standard explanation for this has been the expansion of crack markets in the 1980s; to the degree that increased gun access among young black males was believed to play a role, the implicit assumption was there was a demand shock in gun markets. We argue that in fact the key driver was a radical reduction in the resources and activities of the Bureau of Alcohol, Tobacco and Firearms (BATF) in the 1980s, allowing substantially greater freedom among licensed gun dealers. This (potentially in conjunction with manufacturing technology improvements) led to a surge in lower-priced, "entry-level" guns. We document that this increased the availability of guns to criminally active youth and led to much higher rates of gun access for young men, particularly for 25 ACP, 380 ACP and 9mm autoloaders. The increase and decrease in gun violence can be matched to changes along this causal chain. In contrast, the link between crack markets and gun violence appears to be largely spurious and driven by a shared trend of growth in the United States from 1985 to 1993.

Criminal Network Formation and Optimal Detection Policy: The Role of Cascade of Detection

Liuchun Deng
,
Johns Hopkins University
Yufeng Sun
,
Chinese University of Hong Kong

Abstract

This paper investigates the effect of cascade of detection, that is, how detection of a criminal triggers detection of his network neighbors, on criminal network formation. We develop a model in which criminals choose both links and actions. We show that the degree of cascade of detection plays an important role in shaping equilibrium criminal networks. Surprisingly, greater cascade of detection could reduce ex ante social welfare. In particular, we prove that full cascade of detection yields a weakly denser criminal network than that under partial cascade of detection. We further characterize the optimal allocation of the detection resource and demonstrate that it should be highly asymmetric among ex ante identical agents

Avoiding Convictions: Regression Discontinuity Evidence on Court Deferrals for First-Time Drug Offenders

Michael Mueller-Smith
,
University of Michigan
Kevin Schnepel
,
University of Sydney

Abstract

This paper studies the causal impact of court deferrals, a legal strategy to help defendants avoid a felony conviction record, on the future criminal and labor market outcomes of first-time felony drug offenders. To accomplish this, we exploit two natural experiments in Harris County, Texas, in which defendants appearing in court one day versus the next experienced abruptly different likelihoods of deferral. In 1994 deferral rates dropped by 34 percentage points the day following the implementation of a penal code reform; in 2007 deferral rates increased by 22 percentage points the day after the unexpected failure of a ballot initiative to expand the county jail. Using administrative data and local polynomial regression discontinuity methods, we find robust evidence consistent across both experiments that regimes with expanded use of court deferrals generated substantially lower rates of reoffending and unemployment over a five-year follow-up period. Additional analysis delves further into the timing, nature and incidence of these impacts. Together our results suggest that increasing the use of deferral programs may be an attractive and feasible option for a jurisdiction seeking to reduce the fiscal cost and community impact of its criminal justice system.
JEL Classifications
  • K4 - Legal Procedure, the Legal System, and Illegal Behavior