Criminals and the Price System: Evidence from Czech Metal Thieves

Abstract

Objectives: This paper tests the economic theory of criminal behavior. Specifically, it looks at “the carrot” side of the theory, studying how thieves react to changes in monetary gains from crime.

Methods: Using a unique crime-level dataset on metal theft in the Czech Republic, we study thieves’ behavior in a simple regression framework. We argue that variation in metal prices represents a quasi-experimental variation in gains from crime. It is because (i) people steal copper and other nonferrous metals only to sell them to scrapyard and (ii) prices at scrapyards are set by the world market. This facilitates causal interpretation of our regression estimates.

Results: We find that a one-percent increase (decrease) in the re-sale price causes metal thefts to increase (decrease) by one to 1.5 percent. We show that the relationship between prices and thefts is very robust. Moreover, we find that thieves’ responses to price shocks are rapid and consistent.

Conclusions: Our results are in line with the economic model of crime, wherein criminal behavior is modeled as a rational agent’s decision driven by the costs and benefits of undertaking criminal activities. Our estimates are also consistent with recent results from the United Kingdom, suggesting these patterns are more general.

Keywords: Economics of crime, rational choice, gains from crime, criminal opportunities, metal theft.

JEL Classification: K42, Q31, Q32