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Economic Shocks and Crime: Evidence from the Crash of Ponzi Schemes

In November 2008, Colombian authorities dismantled a network of Ponzi schemes, making hundreds of thousands of investors lose tens of millions of dollars throughout the country. Using original data on the geographical incidence of the Ponzi schemes, this paper estimates the impact of their break down on crime. We find that the crash of Ponzi schemes differentially exacerbated crime in affected districts. Confirming the intuition of the standard economic model of crime, this effect is only present in places with relatively weak judicial and law enforcement institutions, and with little access to consumption smoothing mechanisms such as microcredit. In addition, we show that, with the exception of economically-motivated felonies such as robbery, violent crime is not affected by the negative shock.

Abstract

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Subject

Economía | Investigación socioeconómica | Sector financiero | Seguridad

País / Región

Colombia

URI

https://scioteca.caf.com/handle/123456789/843

Date

2016-03-14

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6.1 Documentos de trabajo en investigación socioeconómica

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CC-BY-NC
Except where otherwised noted, this item's license is described as CC-BY-NC
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Files

Ponzi and crime Vargas et al.pdf (2.47 MB)

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CAF

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