The Changing Returns to Crime: How Do Criminals Respond to Changes in Goods Prices?

Abstract:

Economic models of crime argue that changing economic incentives can alter participation of individuals in criminal activities. We study what happens when the prices of goods change, arguing that this can alter individuals’ expected returns from crime, as criminals may switch between stealing less and more expensive goods as relative prices change. We use detailed monthly data on burglaries, thefts and robberies in London from the Metropolitan Police Service between January 2002 and December 2012, where the key data feature we exploit is that we know what was stolen in the reported incidents. We link this to detailed product price data and estimate a significant positive crime elasticity with respect to prices from panel data models that relate changes in stolen goods to changes in their prices. We also develop empirical models that relate changes in stolen goods to changes in the price of that good and also to the prices of other goods and estimate significant cross-price elasticities which show that price shifts can cause potential criminals to substitute away from goods with a lower price (and associated lower return) to those with a higher price (and higher associated return).