Job Loss, Credit and Crime in Colombia

By Gaurav Khanna, Carlos Medina, Anant Nyshadham, Christian Posso, Jorge Tamayo

We investigate the effects of job displacement, as a result of mass-layoffs, on criminal arrests using a matched employer-employee-crime dataset from Medellín, Colombia. Job displacement leads to immediate and persistent earnings losses, and higher probability of arrest for both the displaced worker and family members. Leveraging a banking policy-reform, we find that greater access to credit attenuates the criminal response to job loss. Impacts on arrests are pronounced for property crimes and among younger men for whom opportunities in criminal enterprises are prevalent. Taken together, our results are consistent with economic incentives contributing to criminal participation decisions after job losses.

Boston, MA: Harvard Business School, 2020. 35p.