Urban Crime and Labor Mobility
Federal Reserve Bank of St. Louis Working Paper No. 2007-046D
26 Pages Posted: 27 Mar 2008 Last revised: 22 Apr 2010
Date Written: April 2010
We present a model of crime where two municipalities exist within a metropolitan statistical area (MSA). Consistent with the literature, local law enforcement has a crime reduction effect and a crime diversion effect. The former confers a spillover benefit to the other municipality, while the latter a spillover cost. If the net spillovers are positive (negative), then the respective Nash enforcement levels are too low (high) from the perspective of the MSA. When we allow for Tiebout type mobility, labor will move to the location offering lower disutility of crime (including the tax burden). To attract labor, both jurisdictions would like to reduce crime in their municipality. Interestingly, this could raise or reduce enforcement compared with the immobility case. If it was too high (low) under immobility, it will be raised (reduced) further under mobility. In the symmetric case, neither can gain any labor, but the competition for it pushes the jurisdictions further away from the efficient outcome. Thus, mobility is necessarily welfare reducing. Next, we consider asymmetry in the context of differences in efficiency of enforcement. The low cost municipality has the lower crime damage (inclusive of the tax burden) and attracts labor. Mobility is necessarily welfare reducing for the high cost municipality and for the MSA, but it has an ambiguous effect on the low cost municipality. Finally, we extend the model and allow residents to choose between productive and criminal activities. We conclude that to the extent that enforcement increases the number of criminals (“replacement effect”), jurisdictions have an incentive to reduce their enforcement levels relative to the no-occupational choice case. Additionally, the equilibrium levels of enforcement are more likely to be overprovided in the presence of occupational choice.
Keywords: crime, enforcement, labor mobility
JEL Classification: H73, K42, R23
Suggested Citation: Suggested Citation