By Matt Weidinger | Amy Simon

Key Points

• The nation’s unemployment benefits system, which was significantly expanded during the COVID-19 pandemic, suffered unprecedented losses to fraud and improper payments.

• Official—and still partial—estimates of improper payments approach $200 billion, while unofficial estimates suggest $400 billion or more may have been lost.

• There are multiple causes of these record improper payments, including historically large benefits, poor program design including eligibility self-certification in new programs, and degraded administrative systems without adequate defenses against various fraudulent schemes.

• State and federal policymakers should review the causes and consequences of these unprecedented losses and take specific steps, such as those outlined in this report, to both prevent a recurrence of the record taxpayer losses experienced during the pandemic and better establish a proactive anti-fraud posture for the unemployment insurance system.

Washington, DC: American Enterprise Institute, 2024. 45p.

By Miguel A. Mascarúa Lara

How does imperfect law enforcement affect drug trafficking, predation on firms, informality, and aggregate production? To quantify it, a general equilibrium occupational model is developed in which there is room for drug trafficking, crime against businesses, and tax evasion in the presence of imperfect institutions. Detailed micro-level data on business victimization and cartels in Mexico are used to calibrate the model. It is found that the imperfect application of the law generates considerable losses in production derived from a misallocation of occupations and resources. Finally, using counterfactual simulations, the effects of policies that seek to improve the allocation of resources are calculated. With complete law enforcement in the illegal drug market, the workers in that sector would relocate to the productive sector, and aggregate production would increase. Without crimes against businesses, which would allow a reallocation of work, capital, and occupations to the formal sector, production would increase even more. However, the largest effects come from a decrease in informality

Banco de México Working Papers N° 2022-16 . Mexico City, Bank of Mexico, 2022. 55p.

By Keith Finlay, Elizabeth Luh, Matthew Gross and Michael Mueller-Smith.

  We estimate the causal impact of financial sanctions in the U.S. criminal justice system. We utilize a regression discontinuity design and exploit two distinct natural experiments: the abrupt introduction of driver responsibility fees (DRF) in Michigan and Texas. These discontinuously imposed additional surcharges ($300–$6,000) for criminal traffic offenses. Although the policies generated almost $3 billion of debt, we find consistent evidence that the DRFs had no impact on recidivism, earnings, or romantic partners’ outcomes over the next decade. Without evidence of a general or specific deterrence effect and modest success with debt collection, we find little justification for these policies.

Unpublished paper, 2022. 47p.