Breaking Bad: How Health Shocks Prompt Crime

Steffen Andersen, Gianpaolo Parise, Kim Peijnenburg

Research output: Working paperResearch

Abstract

We explore the impact of health shocks on criminal behavior. Exploiting variations in the timing of cancer diagnoses, we find that health shocks elicit an increase in the probability of committing crime by 13%. This response is economically significant at both the extensive (first-time criminals) and intensive margin (reoffenders). We uncover evidence for two channels explaining our findings. First, diagnosed individuals seek illegal revenues to compensate for the loss of earnings on the legal labor market. Second, cancer patients face lower expected cost of punishment through a lower survival probability. We do not find evidence that changes in preferences explain our findings. The documented pattern is stronger for individuals who lack insurance through preexisting wealth, home equity, or marriage. Welfare programs that alleviate the economic repercussions of health shocks are effective at mitigating the ensuing negative externality on society.
Original languageEnglish
Place of PublicationLondon
PublisherCentre for Economic Policy Research
Number of pages41
Publication statusPublished - Mar 2021
SeriesCentre for Economic Policy Research. Discussion Papers
NumberDP15899
ISSN0265-8003

Keywords

  • Economics of crime
  • Event study
  • Health shocks
  • Human capital

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