The Impact of Economic Opportunity on Criminal Behavior: Evidence from the Fracking Boom

Economic theory suggests crime should decrease as economic opportunities increase the returns to legal activities. However, there are well-documented cases where crime increases in response to areas becoming more prosperous. This paper addresses this puzzle by examining the effects on crime only for residents already living in the area prior to the economic boom. This approach isolates the effect of local economic opportunity from the effect of changing composition due to in-migration during these periods. To identify effects, I exploit withinand across-county variation in exposure to hydraulic fracturing activities in North Dakota using administrative individual-level data on residents, mineral lease records, and criminal charges. Results indicate that the start of economic expansion – as signaled by the signing of leases – leads to a 14 percent reduction in criminal cases filed. Effects continue once the fracking boom escalates into to production period. These results are in contrast to the observed aggregate increase in crime from fracking activities and consistent with improved economic opportunity reducing crime, highlighting the important role of compositional changes.