Publications
Publications
- 2019
- HBS Working Paper Series
Formal Employment and Organized Crime: Regression Discontinuity Evidence from Colombia
By: Gaurav Khanna, Carlos Medina, Anant Nyshadham and Jorge Tamayo
Abstract
Canonical models of criminal behavior highlight the importance of economic incentives and employment opportunities in determining participation in crime (Becker, 1968). Yet, deriving causal corroborating evidence from individual-level variation in employment incentives has proven challenging. We link rich administrative micro-data on socioeconomic measures of individuals with the universe of criminal arrests in Medellin over a decade. We test whether increasing the relative costs to formal-sector employment led to more crime. We exploit exogenous variation in formal employment around a socioeconomic score cutoff, below which individuals receive generous health benefits if not formally employed. Our regression discontinuity estimates show that this popular policy induced a fall in formal-sector employment and a corresponding spike in organized crime. This relationship is stronger in neighborhoods with more opportunities for organized crime. There are no effects on less economically motivated crimes.
Keywords
Gangs; Informality; Medellín; Economic Sectors; Crime and Corruption; Health Care and Treatment; Policy; Colombia
Citation
Khanna, Gaurav, Carlos Medina, Anant Nyshadham, and Jorge Tamayo. "Formal Employment and Organized Crime: Regression Discontinuity Evidence from Colombia." Harvard Business School Working Paper, No. 19-099, March 2019. (Conditionally Accepted: Economic Journal.)