Crime, punishment, and background risks [An article from: Journal of Economic Behavior and Organization]

This digital document is a journal article from Journal of Economic Behavior and Organization, published by Elsevier in 2007. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
We show that if the punishment for a property crime effectively eliminates an individual's initial wealth, as with a very long prison sentence, then such criminal activities become less desirable for a risk-averse and prudent individual if his initial wealth distribution undergoes a second-order stochastic dominant improvement. Similar results obtain under additional restrictions if the punishment reduces an individual's initial wealth by some factor less than 1. In a general-equilibrium model where the endogenous victimization risk is part of individuals' background risks, we also show that the availability of insurance for the victimization risk lowers economy-wide crime rates.