Economic Shocks and Crime: Evidence from the Brazilian Trade Liberalization

Authors

Rafael Dix-Carneiro, Duke University
Rodrigo R. Soares, Columbia University
Gabriel Ulyssea, Pontifical Catholic University of Rio de JaneiroFollow

Series

Upjohn Institute working paper ; 17-278

**Published Version**

In American Economic Journal: Applied Economics 10(4): 158-195

DOI

10.17848/wp17-278

Issue Date

July 26, 2017

Abstract

This paper studies the effect of changes in economic conditions on crime. We exploit the 1990s trade liberalization in Brazil as a natural experiment generating exogenous shocks to local economies. We document that regions exposed to larger tariff reductions experienced a temporary increase in crime following liberalization. Next, we investigate through what channels the trade-induced economic shocks may have affected crime. We show that the shocks had significant effects on potential determinants of crime, such as labor market conditions, public goods provision, and income inequality. We propose a novel framework exploiting the distinct dynamic responses of these variables to obtain bounds on the effect of labor market conditions on crime. Our results indicate that this channel accounts for 75 to 93 percent of the effect of the trade-induced shocks on crime.

Sponsorship

W.E. Upjohn Institute for Employment Research Early Career Research Award 16-151-05

Subject Areas

ECONOMIC DEVELOPMENT; Local labor markets