The Eﬀect of Job Loss and Unemployment Insurance on Crime in Brazil
76 Pages Posted: 26 May 2020
Date Written: May 2020
We investigate the eﬀect of job loss and unemployment beneﬁts on criminal behavior, exploiting individual-level data on the universe of workers and criminal cases in Brazil over the 2009-2017 period. We match workers displaced upon plausibly exogenous mass layoﬀs with observationally-equivalent control groups to identify dynamic treatment eﬀects of job loss while allowing for treatment eﬀect heterogeneity. In our preferred speciﬁcation, the probability of criminal prosecution increases by 23% upon job loss and remains approximately constant during the following years. Our unusually large dataset allows us to precisely estimate increases in almost all types of crimes – including oﬀenses with no economic motivation – as well as spillover eﬀects on other household members. The estimated eﬀects remain robust when restricting to arrests “in ﬂagrante”, which are less subject to diﬀerential reporting by employment status. We then evaluate the mitigating eﬀect of unemployment beneﬁts leveraging on discontinuous changes in eligibility. Regression discontinuity estimates suggest that unemployment beneﬁts covering 3 to 5 months after displacement completely oﬀset potential crime increases upon job loss, especially for liquidity-constrained individuals, although this eﬀect completely vanishes upon beneﬁt expiration. Our ﬁndings point at liquidity constraints and psychological stress as main drivers of criminal behavior upon job loss, while substitution between time on the job and leisure does not seem to play an important role.
Keywords: unemployment, crime, unemployment insurance, registry data
JEL Classification: K42, J63, J65
Suggested Citation: Suggested Citation