Crime and Education in a Model of Information Transmission

36 Pages Posted: 16 Nov 2010

See all articles by Darwin F. Cortes

Darwin F. Cortes

Universidad del Rosario

Guido Friebel

Goethe University Frankfurt; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Dario Maldonado

Universidad del Rosario - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: November 15, 2010

Abstract

We model the decisions of young individuals to stay in school or drop-out and engage in criminal activities. We build on the literature on human capital and crime engagement and use the framework of Banerjee (1993) that assumes that the information needed to engage in crime arrives in the form of a rumor and that individuals update their beliefs about the profitability of crime relative to education. These assumptions allow us to study the effect of social interactions on crime. We first show that a society with fully rational students is less vulnerable to crime than an otherwise identical society with boundedly rational students. We also investigate the spillovers from the actions of talented students to less talented students and show that policies that decrease the cost of education for talented students may increase the vulnerability of less talented students to crime. This is always the case when the heterogeneity of students with respect to talent is sufficiently small.

Keywords: Human Capital, The Economics of Rumors, Social Interactions, Urban Economics

JEL Classification: D82, D83, I28

Suggested Citation

Cortes, Darwin F. and Friebel, Guido and Maldonado, Dario, Crime and Education in a Model of Information Transmission (November 15, 2010). FEEM Working Paper No. 129.2010, Available at SSRN: https://ssrn.com/abstract=1709366 or http://dx.doi.org/10.2139/ssrn.1709366

Darwin F. Cortes (Contact Author)

Universidad del Rosario ( email )

Calle 12 No. 6-25
Bogota, DC
Colombia

Guido Friebel

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

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

Dario Maldonado

Universidad del Rosario - Department of Economics ( email )

Casa Pedro Fermín
Calle 14 # 4-69
Bogota
Colombia

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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