This paper tests the hypothesis that the timing of welfare payments
affects criminal activity. Analysis of daily reported incidents of
major crimes in twelve U.S. cities reveals an increase in crime over
the course of monthly welfare payment cycles. This increase reflects an
increase in crimes that are likely to have a direct financial
motivation like burglary, larceny-theft, motor vehicle theft, and
robbery, as opposed to other kinds of crime like arson, assault,
homicide, and rape. Temporal patterns in crime are observed in
jurisdictions in which disbursements are focused at the beginning of
monthly welfare payment cycles and not in jurisdictions in which
disbursements are relatively more staggered.
Here is the link, here are non-gated versions.
For whatever reason I couldn’t use the ungated link. I found the article in working paper form on Foley’s website though: http://www.people.hbs.edu/ffoley/Crime.pdf
“Why do you rob banks?”
“Because that’s where the money is.”
Attributed to Willie Sutton
“Why do you rob shortly after the welfare checks arrive?”
“Because that’s when the money is.”
Max: It is.
As for legitimate (read: Legal) entrepreneurial activity, perhaps the problem is that the entrepreneurs om question simply feal they have a greater expectation committing illegal acts than legal ones.
First, Max: it is entrepreneurial, but the problem is that it doesn’t create value (unless the utility gain from the robber outweighs the loss from the rob-ee)
Second, I think what’s more important than the “liquidity constrained” angle is the fact that this flies in the face of the neoclassical life-cycle model of consumption smoothing over time. If people acted in that way, then this trend wouldn’t appear: they wouldn’t be short on cash at the end of the week/month/whatever because they smoothed consumption, and criminals would spread their “work” over time, not wait until the end of the week/month.
Do not try to mutilate what I said with dumbass word games about the meaning of “entrepreneurial.” That word has a common and well understood meaning. I will note, to insure clarity, that dumbass also has a common and well understood meaning.
Conclusion: “More crime takes place when more time has passed since welfare
payments occurred.”
Sort of a thumbsucker, isn’t it?
Jsalvati: Probably more than we think.
As for Jacqueline’s question, I’m sure the implication you would like to make is more important to you than the answer to your question.
In some sense many Americans are ignorant of the nature of credit (and they certainly don’t have access to it). But that doesn’t make them non-economic actors. The assumption (and Jacqueline really is begging the question here) that they are not is deeply flawed. But they aren’t angels wronged by society. The people robbing liquor stores are not the same people driving to work every day. There are deep, fundamental differences in how people behave in distinct situations. Time preferences are different–probably (as this research suggests) so radically different as to violate transitivity with a positive discount factor.
But don’t jump out and suggest that people in the inner city are too dumb to practice consumption smoothing.
First: “Doesn’t consumption smoothing require access to credit and understanding of how to use it?” Yes, but if that would predict people taking loans when income is low to pay for consumption later. This is usually used regarding low income early in life, paid for later in life; not taking a loan on Thursday, paying it back on Monday, and taking another loan out on the following Thursday. Consumption smoothing would predict taking your check and smoothing your costs according to that check over the time period until the next one arrives. It would not be economically rational to go back and forth repeatedly between negative and positive saving. At least not according to the life cycle model.
Second: “Time preferences are different–probably (as this research suggests) so radically different as to violate transitivity with a positive discount factor.” But isn’t transitivity a requirement of economic rationality?
I believe that welfare recipients have their money electronically deposited. Thus, a smart robber would wait by the ATM machine and rob after a withdrawal.
I believe it is a state law in Iowa that you must have a checking account in order to receive your Title 19 payment. I’m will check with my bank on Monday.
I take issue with that last comment; I’m muddling through growing a business and have never had a steady income. Despite a solid mix of success and failure, I feel in my gut that I can persevere — no real basis for that hope, but confidence in myself and two kids to support. I am also convinced that had I worked for someone else for too long, I would have lost my drive and just preferred a steady income instead. So the notion that you can ‘train’ people to be entrepreneurial is complete nonsense — you can probably just train them to attend entrepreneurialism courses and lecture to others about their (absent) innovative spirit. Risk-taking on the street is probably much better preparation for running a business.
Iowa does not make welfare recipients have a savings or checking account. I was wrong.
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