Poverty Traps, Economic Inequality and Incentives for Delinquency

Cuadernos de Economía, Vol. 32, No. 61, pp. 753-786, 2013

34 Pages Posted: 11 Apr 2014

See all articles by Edgar Villa

Edgar Villa

Universidad de la Sabana

Andrés Salazar

Government of the Republic of Colombia - Departamento Nacional de Planeación

Date Written: December 31, 2013

Abstract

This paper explores theoretical linkages between poverty traps, economic inequality and delinquency in a perfect competition overlapping generations model characterized by dual legal production sectors and one illegal sector. The model posits an absence of credit for human capital accumulation, which generates barriers to skilled educational attainment. We find that the existence of a poverty trap under conditions of sufficient initial economic inequality and costly indivisible human capital investment generates persistent delinquency in the long run. We examine steady state changes caused by shocks that increase skilled wages or reduce land assets available to the unskilled, finding that these shocks produce outbursts of delinquency that die out later if the shocks are temporary but increases permanently otherwise. We also find that an increase on relative poverty has an ambiguous effect on long run delinquency rates while an increased focus on law enforcement policies, intended to increase deterrence and incapacitation, reduces delinquency in the long run and increases wealth inequality.

Keywords: poverty traps, inequality, delinquency, human capital

JEL Classification: I30, J31, K42, O11, O17

Suggested Citation

Villa, Edgar and Salazar, Andrés, Poverty Traps, Economic Inequality and Incentives for Delinquency (December 31, 2013). Cuadernos de Economía, Vol. 32, No. 61, pp. 753-786, 2013 . Available at SSRN: https://ssrn.com/abstract=2422934

Edgar Villa (Contact Author)

Universidad de la Sabana ( email )

Campus Universitario del Puente del Común, Km. 7
Chia, Cundinamarca A.A.140122
Colombia

Andrés Salazar

Government of the Republic of Colombia - Departamento Nacional de Planeación ( email )

Bogota
Colombia

Register to save articles to
your library

Register

Paper statistics

Downloads
47
Abstract Views
609
PlumX Metrics