Economic Shocks and Crime: Evidence from the Brazilian Trade Liberalization

56 Pages Posted: 18 May 2017

See all articles by Rafael Dix-Carneiro

Rafael Dix-Carneiro

Duke University

Rodrigo R. Soares

Columbia University - School of International & Public Affairs (SIPA); Getulio Vargas Foundation (FGV) - Sao Paulo School of Economics; IZA Institute of Labor Economics

Gabriel Ulyssea

University of Oxford - Department of Economics

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Date Written: May 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.

Suggested Citation

Dix-Carneiro, Rafael and Soares, Rodrigo R. and Ulyssea, Gabriel, Economic Shocks and Crime: Evidence from the Brazilian Trade Liberalization (May 2017). NBER Working Paper No. w23400, Available at SSRN: https://ssrn.com/abstract=2968238

Rafael Dix-Carneiro (Contact Author)

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

Rodrigo R. Soares

Columbia University - School of International & Public Affairs (SIPA) ( email )

420 West 118th Street
New York, NY 10027
United States

Getulio Vargas Foundation (FGV) - Sao Paulo School of Economics ( email )

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São Paulo, São Paulo 01332-000
Brazil

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Gabriel Ulyssea

University of Oxford - Department of Economics ( email )

10 Manor Rd
Oxford, OX1 3UQ
United Kingdom

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