Home About Latest Browse RSS Advanced Search

Federal Reserve Bank of Cleveland
Working Papers (Old Series)
Crime and the labor market: a search model with optimal contracts
Bryan Engelhardt
Guillaume Rocheteau
Peter Rupert
Abstract

This paper extends the Pissarides (2000) model of the labor market to include crime and punishment `a la Becker (1968). All workers, irrespective of their labor force status can commit crimes and the employment contract is determined optimally. The model is used to study, analytically and quantitatively, the effects of various labor market and crime policies. For instance, a more generous unemployment insurance system reduces the crime rate of the unemployed but its effect on the crime rate of the employed depends on job duration and jail sentences. When the model is calibrated to U.S. data, the overall effect on crime is positive but quantitatively small. Wage subsidies reduce unemployment and crime rates of employed and unemployed workers, and improve society’s welfare. Hiring subsidies reduce unemployment but they can raise the crime rate of employed workers. Crime policies (police technology and jail sentences) affect crime rates significantly but have only negligible effects on the labor market.


Download Full text
Cite this item
Bryan Engelhardt & Guillaume Rocheteau & Peter Rupert, Crime and the labor market: a search model with optimal contracts, Federal Reserve Bank of Cleveland, Working Papers (Old Series) 0715, 2007.
More from this series
JEL Classification:
Subject headings:
Keywords: Crime ; Unemployment ; Labor market
For corrections, contact 4D Library ()
Fed-in-Print is the central catalog of publications within the Federal Reserve System. It is managed and hosted by the Economic Research Division, Federal Reserve Bank of St. Louis.

Privacy Legal