Economic Shocks and Crime: Evidence from the Brazilian Trade Liberalization

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. (JEL D31, F13, F16, H41, K42, O17, O19)

Dynamic linkages between poverty, inequality, crime, and social expenditures in a panel of 16 countries: two-step GMM estimates

“…Trade liberalization policies reduce incidence of crime rates and improve country's PCI, which enforce the need to capitalize domestic exports by expanding local industries. Thus, the United Nations SDGs would be achieved by its implication in the countries perspectives (Dix-Carneiro et al 2018). The study achieved the research objectives by its theoretical and empirical contribution, which seems challenge for the developmental experts to devise policies toward more pro-growth and PPG.…”

Negative shocks predict change in cognitive function and preferences: assessing the negative affect and stress hypothesis

“…It is possible that the recall manipulation is too mild to generate an impact (there are obvious limitations in terms of what can be done within the ethical limits of experiments and the logistical limits of online surveys), so we cannot exclude that with stronger manipulations, the null hypothesis can be rejected. As reviewed in the Introduction, there is quasi-experimental evidence that shows an increase in anti-social behavior (petty crimes and property crimes) after negative shocks [29][30][31][32] , but those results do not contradict our results for two reasons: first, in the anti-social behavior literature, the results are mediated by weak institutions; second, an increase in anti-social behavior under shock is compatible with any set of preferences, simply if the opportunity costs of misbehaving for some individuals change dramatically. Table 1.…”

“…One study has shown that when pure endowment shocks are induced in a two-person trust game, people become less pro-social, however in this case, inequality is more salient than shock because the focus is on the comparison of the endowments between the two counterparts and arguably the latter (rather than the former) is driving the results 28 . Other studies have shown that anti-social behavior after negative shocks occur variously, due to rainfall variations in Germany 29 , grapevine diseases in nineteenth century France 30 , the collapse of financial schemes 31 , and trade shocks 32 ; with the finding that under weak institutions, shocks drive anti-social behavior. This latter strand seems to be at odds with the rest of the literature and will be addressed in the Discussion.…”

Roots of dissent: Trade liberalization and the rise of populism in Brazil

“…Our final sample includes 480 microregions representing the most intuitive spatial aggregation of neighbouring areas that form a local market (Dix-Carneiro and Kovak 2017). To account for potential changes in the shape and size of microregions between 1990 and 2018, we use the 1991 fixed boundaries throughout the study, 7 in line with the approach proposed in Dix-Carneiro et al (2018) and Dix-Carneiro and Kovak (2019).…”

“…Information is presented at microregion-level, so no matching between municipios and microregions is needed. Homicide rate has been considered a reliable proxy for overall criminality in Brazil in previous studies, and it has been shown to be correlated with trade shocks in the short term (Dix-Carneiro et al 2018). Because Bolsonaro's discourse relied closely on stoking feeling of insecurity and fear (Hunter and Power 2019), we also make use of data collected by the Latin America Public Opinion Project (LAPOP) in order to have a better measure of people's perception about safety.…”