Poverty and Crime: Evidence from Rainfall and Trade Shocks in India

46 Pages Posted: 3 Apr 2014 Last revised: 3 Sep 2014

Lakshmi Iyer

Harvard Business School - Business, Government and the International Economy Unit

Petia B. Topalova

International Monetary Fund (IMF)

Date Written: September 2, 2014

Abstract

Does poverty lead to crime? We shed light on this question using two independent and exogenous shocks to household income in rural India: the dramatic reduction in import tariffs in the early 1990s and rainfall variations. We find that trade shocks, previously shown to raise relative poverty, also increased the incidence of violent crimes and property crimes. The relationship between trade shocks and crime is similar to the observed relationship between rainfall shocks and crime. Our results thus identify a causal effect of poverty on crime. They also lend credence to a large literature on the effects of weather shocks on crime and conflict, which has usually assumed that the income channel is the most relevant one.

Keywords: Rainfall, Weather, Crime, Trade Liberalization, India

JEL Classification: D74, F63, I38, Q34, Q56

Suggested Citation

Iyer, Lakshmi and Topalova, Petia B., Poverty and Crime: Evidence from Rainfall and Trade Shocks in India (September 2, 2014). Harvard Business School BGIE Unit Working Paper No. 14-067. Available at SSRN: https://ssrn.com/abstract=2419522 or http://dx.doi.org/10.2139/ssrn.2419522

Lakshmi Iyer (Contact Author)

Harvard Business School - Business, Government and the International Economy Unit ( email )

Cambridge, MA
United States

Petia B. Topalova

International Monetary Fund (IMF) ( email )

700 19th Street N.W.
Washington, DC 20431
United States

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