IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp9638.html
   My bibliography  Save this paper

Local Labor Market Conditions and Crime: Evidence from the Brazilian Trade Liberalization

Author

Listed:
  • Dix-Carneiro, Rafael

    (Duke University)

  • Soares, Rodrigo R.

    (Insper, São Paulo)

  • Ulyssea, Gabriel

    (University College London)

Abstract

This paper estimates the effect of local labor market conditions on crime in a developing country with high crime rates. Contrary to the previous literature, which has focused exclusively on developed countries with relatively low crime rates, we find that labor market conditions have a strong effect on homicides. We exploit the 1990s trade liberalization in Brazil as a natural experiment generating exogenous shocks to local labor demand. Regions facing more negative shocks experience large relative increases in crime rates in the medium term, but these effects virtually disappear in the long term. This pattern mirrors the labor market responses to the trade shocks. Using the trade liberalization episode to design an instrumental variables strategy, we find that a 10% reduction in expected labor market earnings (employment rate × earnings) leads to a 39% increase in homicide rates. Our results highlight an additional dimension of adjustment costs following trade shocks that has so far been overlooked in the literature.

Suggested Citation

  • Dix-Carneiro, Rafael & Soares, Rodrigo R. & Ulyssea, Gabriel, 2016. "Local Labor Market Conditions and Crime: Evidence from the Brazilian Trade Liberalization," IZA Discussion Papers 9638, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp9638
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp9638.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Petia Topalova, 2010. "Factor Immobility and Regional Impacts of Trade Liberalization: Evidence on Poverty from India," American Economic Journal: Applied Economics, American Economic Association, vol. 2(4), pages 1-41, October.
    2. Costa, Francisco & Garred, Jason & Pessoa, João Paulo, 2016. "Winners and losers from a commodities-for-manufactures trade boom," Journal of International Economics, Elsevier, vol. 102(C), pages 50-69.
    3. Raphael, Steven & Winter-Ember, Rudolf, 2001. "Identifying the Effect of Unemployment on Crime," Journal of Law and Economics, University of Chicago Press, vol. 44(1), pages 259-283, April.
    4. Naércio Aquino Menezes Filho & Marc-Andreas Muendler, 2007. "Labor Reallocation in Response to Trade Reform," CESifo Working Paper Series 1936, CESifo.
    5. Olivier Deschênes & Enrico Moretti, 2009. "Extreme Weather Events, Mortality, and Migration," The Review of Economics and Statistics, MIT Press, vol. 91(4), pages 659-681, November.
    6. Denis Fougère & Francis Kramarz & Julien Pouget, 2009. "Youth Unemployment and Crime in France," Journal of the European Economic Association, MIT Press, vol. 7(5), pages 909-938, September.
    7. Rafael Dix‐Carneiro, 2014. "Trade Liberalization and Labor Market Dynamics," Econometrica, Econometric Society, vol. 82(3), pages 825-885, May.
    8. Koujianou Goldberg, Pinelopi & Pavcnik, Nina, 2003. "The response of the informal sector to trade liberalization," Journal of Development Economics, Elsevier, vol. 72(2), pages 463-496, December.
    9. Eric D. Gould & Bruce A. Weinberg & David B. Mustard, 2002. "Crime Rates And Local Labor Market Opportunities In The United States: 1979-1997," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 45-61, February.
    10. Hale Utar, 2018. "Workers beneath the Floodgates: Low-Wage Import Competition and Workers’ Adjustment," The Review of Economics and Statistics, MIT Press, vol. 100(4), pages 631-647, October.
    11. David H. Autor & David Dorn & Gordon H. Hanson & Jae Song, 2014. "Trade Adjustment: Worker-Level Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(4), pages 1799-1860.
    12. Grogger, Jeff, 1998. "Market Wages and Youth Crime," Journal of Labor Economics, University of Chicago Press, vol. 16(4), pages 756-791, October.
    13. Kislaya Prasad, 2012. "Economic Liberalization and Violent Crime," Journal of Law and Economics, University of Chicago Press, vol. 55(4), pages 925-948.
    14. Ariaster B. Chimeli & Rodrigo R. Soares, 2017. "The Use of Violence in Illegal Markets: Evidence from Mahogany Trade in the Brazilian Amazon," American Economic Journal: Applied Economics, American Economic Association, vol. 9(4), pages 30-57, October.
    15. Morgan Kelly, 2000. "Inequality And Crime," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 530-539, November.
    16. Nina Pavcnik & Andreas Blom & Pinelopi Goldberg & Norbert Schady, 2004. "Trade Liberalization and Industry Wage Structure: Evidence from Brazil," The World Bank Economic Review, World Bank, vol. 18(3), pages 319-344.
    17. Lakshmi Iyer & Petia Topalova, 2014. "Poverty and Crime: Evidence from Rainfall and Trade Shocks in India," Harvard Business School Working Papers 14-067, Harvard Business School, revised Aug 2014.
    18. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "Distributional Effects of Globalization in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 45(1), pages 39-82, March.
    19. Brian K. Kovak, 2013. "Regional Effects of Trade Reform: What Is the Correct Measure of Liberalization?," American Economic Review, American Economic Association, vol. 103(5), pages 1960-1976, August.
    20. Fajnzylber, Pablo & Lederman, Daniel & Loayza, Norman, 2002. "Inequality and Violent Crime," Journal of Law and Economics, University of Chicago Press, vol. 45(1), pages 1-40, April.
    21. Mustard, David B., 2010. "How Do Labor Markets Affect Crime? New Evidence on an Old Puzzle," IZA Discussion Papers 4856, Institute of Labor Economics (IZA).
    22. Ming-Jen Lin, 2008. "Does Unemployment Increase Crime?: Evidence from U.S. Data 1974–2000," Journal of Human Resources, University of Wisconsin Press, vol. 43(2), pages 413-436.
    23. François Bourguignon & Jairo Nuñez & Fabio Sanchez, 2003. "A Structural Model of Crime and Inequality in Colombia," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 440-449, 04/05.
    24. Bruce L. Benson & Paul R. Zimmerman (ed.), 2010. "Handbook on the Economics of Crime," Books, Edward Elgar Publishing, number 13180.
    25. Ehrlich, Isaac, 1973. "Participation in Illegitimate Activities: A Theoretical and Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 521-565, May-June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hirata, Guilherme & Soares, Rodrigo R., 2016. "Competition and the Racial Wage Gap: Testing Becker's Model of Employer Discrimination," IZA Discussion Papers 9764, Institute of Labor Economics (IZA).
    2. Jorge Alvarez & Felipe Benguria & Niklas Engbom & Christian Moser, 2018. "Firms and the Decline in Earnings Inequality in Brazil," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(1), pages 149-189, January.
    3. Deiana, C, 2016. "Local Labour Market Effects of Unemployment on Crime Induced by Trade Shocks," Economics Discussion Papers 16529, University of Essex, Department of Economics.
    4. Lastauskas, Povilas & Tatsi, Eirini, 2017. "Spatial Nexus in Crime and Unemployment in Times of Crisis," Working Paper Series 2/2017, Stockholm University, Swedish Institute for Social Research.
    5. Laura Chioda, 2017. "Stop the Violence in Latin America," World Bank Publications - Books, The World Bank Group, number 25920.
    6. Nishijima, Marislei & Pal, Sarmistha, 2020. "Do Compulsory Schooling Laws Always Work? A Study of Youth Crime in Brazilian Municipalities," IZA Discussion Papers 13097, Institute of Labor Economics (IZA).
    7. Mindaugas Butkus & Kristina Matuzevièi?t? & Alma Maèiulyt?-Šniukien?, 2019. "Do Economic Conditions Still Cause Crime? Some Comforting Empirical Evidences from EU Panel," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 37(2), pages 603-628.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rafael Dix-Carneiro & Rodrigo R. Soares & Gabriel Ulyssea, 2018. "Economic Shocks and Crime: Evidence from the Brazilian Trade Liberalization," American Economic Journal: Applied Economics, American Economic Association, vol. 10(4), pages 158-195, October.
    2. Dix-Carneiro, Rafael & Kovak, Brian K., 2019. "Margins of labor market adjustment to trade," Journal of International Economics, Elsevier, vol. 117(C), pages 125-142.
    3. Eduardo Ferraz & Rodrigo Soares & Juan Vargas, 2022. "Unbundling the relationship between economic shocks and crime," Chapters, in: Paolo Buonanno & Paolo Vanin & Juan Vargas (ed.), A Modern Guide to the Economics of Crime, chapter 8, pages 184-204, Edward Elgar Publishing.
    4. Rafael Dix-Carneiro & Brian K. Kovak, 2017. "Trade Liberalization and Regional Dynamics," American Economic Review, American Economic Association, vol. 107(10), pages 2908-2946, October.
    5. Deiana, C, 2016. "Local Labour Market Effects of Unemployment on Crime Induced by Trade Shocks," Economics Discussion Papers 16529, University of Essex, Department of Economics.
    6. Dix-Carneiro, Rafael & Kovak, Brian K., 2023. "Globalization and Inequality in Latin America," IZA Discussion Papers 16363, Institute of Labor Economics (IZA).
    7. Lastauskas, Povilas & Tatsi, Eirini, 2017. "Spatial Nexus in Crime and Unemployment in Times of Crisis," Working Paper Series 2/2017, Stockholm University, Swedish Institute for Social Research.
    8. Gaurav Khanna & Carlos Medina & Anant Nyshadham & Jorge Tamayo & Nicolas Torres, 2023. "Formal Employment and Organised Crime: Regression Discontinuity Evidence from Colombia," The Economic Journal, Royal Economic Society, vol. 133(654), pages 2427-2448.
    9. Nina Pavcnik, 2017. "The Impact of Trade on Inequality in Developing Countries," NBER Working Papers 23878, National Bureau of Economic Research, Inc.
    10. Nordin , Martin, 2014. "Does Eligibility for Tertiary Education Affect Crime Rates? Quasi-Experimental Evidence," Working Papers 2014:14, Lund University, Department of Economics.
    11. Altindag, Duha T., 2012. "Crime and unemployment: Evidence from Europe," International Review of Law and Economics, Elsevier, vol. 32(1), pages 145-157.
    12. Povilas Lastauskas & Eirini Tatsi, 2013. "Spatial Nexus in Crime and unemployment in Times of crisis: Evidence from Germany," Cambridge Working Papers in Economics 1359, Faculty of Economics, University of Cambridge.
    13. César, Andrés & Falcone, Guillermo & Gasparini, Leonardo, 2021. "Costs and benefits of trade shocks: Evidence from Chilean local labor markets," Labour Economics, Elsevier, vol. 73(C).
    14. Connolly, Laura, 2022. "The effects of a trade shock on gender-specific labor market outcomes in Brazil," Labour Economics, Elsevier, vol. 74(C).
    15. Satadru Das & Naci Mocan, 2020. "Analyzing The Impact Of The World'S Largest Public Works Project On Crime," Economic Inquiry, Western Economic Association International, vol. 58(3), pages 1167-1182, July.
    16. Margaret S. McMillan & Brian McCaig, 2019. "Trade Liberalization and Labor Market Adjustment in Botswana," NBER Working Papers 26326, National Bureau of Economic Research, Inc.
    17. Martin Nordin & Daniel Almén, 2017. "Long-term unemployment and violent crime," Empirical Economics, Springer, vol. 52(1), pages 1-29, February.
    18. Kangoh Lee, 2018. "Unemployment and crime: the role of apprehension," European Journal of Law and Economics, Springer, vol. 45(1), pages 59-80, February.
    19. Corvalan, Alejandro & Pazzona, Matteo, 2019. "Persistent commodity shocks and transitory crime effects," Journal of Economic Behavior & Organization, Elsevier, vol. 158(C), pages 110-127.
    20. Rafael Dix-Carneiro & Brian K. Kovak, 2015. "Trade Reform and Regional Dynamics: Evidence From 25 Years of Brazilian Matched Employer-Employee Data," NBER Working Papers 20908, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    trade liberalization; crime; labor markets;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp9638. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.