Advanced seminar in Economics - Paolo Pinotti (Bocconi University)
Job Loss, Social Insurance, and Criminal behavior: Evidence from Brazil
Wednesday 4 March 2020 (11h00 - 12h30) - Extranef - 109
We investigate the relationship between employment and crime exploiting individual-level data on the universe of (male) workers and criminal cases filed in Brazil over the period 2009-16. Difference-in-differences estimates allowing for dynamic and heterogenous treatment effects as well as for city and sector specific shocks suggest that the probability of being prosecuted for a crime increases by as much as 70 percent after losing a job. The effect is driven both by economically motivated and violent crimes, and there are spillovers on the criminal behavior of other young household members. These estimates are unaffected when focusing only on mass layoffs, thus reducing the scope for omitted confounders and reverse causation at the individual-level. We further evaluate the role of social insurance policies in mitigating the adverse unemployment effects on criminal behavior. Using a regression discontinuity design, we find that eligibility to unemployment benefits, lasting from 3 to 5 months, decreases individual crime by 30% during the first semester of unemployment. However, this effect is short-lived and vanishes in the following periods.