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Publications
  • July 2008
  • Article
  • Journal of Public Economics

Crime and Punishment in the 'American Dream'

By: Rafael Di Tella and Juan Dubra
  • Format:Print
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Abstract

We observe that countries where belief in the "American dream" (i.e., effort pays) prevails also set harsher punishment for criminals. We know that beliefs are also correlated with several features of the economic system (taxation, social insurance, etc). Our objective is to study the joint determination of these three features (beliefs, punitiveness, and economic system) in a way that replicates the observed empirical patterns. We present a model where beliefs determine the types of contracts that firms order and whether workers exert effort. Some workers become criminals, depending on their luck in the labor market, the expected punishment, and an individual shock that we call "meanness." It is this meanness level that a penal system based on "retribution" tries to detect when deciding the severity of the punishment. We find that when initial beliefs differ, two equilibria can emerge out of identical fundamentals. In the "American" (as opposed to the "French") equilibrium, belief in the "American dream" is commonplace, workers exert effort, there are high-powered contracts (and income is unequally distributed) and punishments are harsh. Economists who believe that deterrence (rather than retribution) shapes punishment can interpret the meanness parameter as pessimism about future economic opportunities and verify that two similar equilibria emerge.

Keywords

Crime and Corruption; Economic Systems; Values and Beliefs; Law Enforcement; Mathematical Methods; Personal Characteristics; United States

Citation

Di Tella, Rafael, and Juan Dubra. "Crime and Punishment in the 'American Dream'." Journal of Public Economics 92, no. 7 (July 2008).
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About The Author

Rafael M. Di Tella

Business, Government and the International Economy
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More from the Authors
  • Does Social Media Cause Polarization? Evidence from Access to Twitter Echo Chambers during the 2019 Argentine Presidential Debate By: Rafael Di Tella, Ramiro H. Gálvez and Ernesto Schargrodsky
  • The 2012 Spanish Labor Reform: Lifting All Boats or Levelling Down? By: Vincent Pons, Rafael Di Tella, Santiago Botella and Elena Corsi
  • The Trouble with TCE By: Vincent Pons, Rafael Di Tella and Galit Goldstein
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