Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/130320
Authors: 
Dix-Carneiro, Rafael
Soares, Rodrigo R.
Ulyssea, Gabriel
Year of Publication: 
2016
Series/Report no.: 
IZA Discussion Papers 9638
Abstract: 
This paper estimates the effect of local labor market conditions on crime in a developing country with high crime rates. Contrary to the previous literature, which has focused exclusively on developed countries with relatively low crime rates, we find that labor market conditions have a strong effect on homicides. We exploit the 1990s trade liberalization in Brazil as a natural experiment generating exogenous shocks to local labor demand. Regions facing more negative shocks experience large relative increases in crime rates in the medium term, but these effects virtually disappear in the long term. This pattern mirrors the labor market responses to the trade shocks. Using the trade liberalization episode to design an instrumental variables strategy, we find that a 10% reduction in expected labor market earnings (employment rate × earnings) leads to a 39% increase in homicide rates. Our results highlight an additional dimension of adjustment costs following trade shocks that has so far been overlooked in the literature.
Subjects: 
labor markets
crime
trade liberalization
JEL: 
F16
J23
J24
K42
Document Type: 
Working Paper

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