Crime, Ethics and Occupational Choice: Endogenous Sorting in a Closed Model
Working Paper No. 04-W02
John P. Conley and Ping Wang
ABSTRACT [article]
We consider a simple model in which agents
are endowed with heterogeneous abilities and differing degrees of honesty.
Agents choose either to become criminals or invest in education and become
workers instead. The model is closed in that all criminal proceeds are
stolen from agents working in the formal sector and that expenditures on
both deterrence and punishment of criminals are paid for through taxes
levied on workers. Thus, although we assume that there no direct interactive
effects among criminals, criminals crowd each other in two ways: positively
in that enforcement and punishment resources become more widely diffused as
more agents commit crimes, and negatively in that the presence of more
criminals implies that there is less loot to be divided over a larger number
of thieves. We establish the possibility of multiple equilibria and
characterize the equilibrium properties. We then evaluate the effectiveness
of deterrence policies under a balanced government budget.
Keywords and Phrases: Criminal behavior, educational choice, punishment
JEL Classification Numbers: I2, J2, J62, K42