Center for Effective Global Action
Formal Employment and Organized Crime: Regression Discontinuity Evidence from Colombia
- Author(s): Khanna, Gaurav
- Medina, Carlos
- Nyshadham, Anant
- Tamayo, Jorge A.
- et al.
Canonical models of crime emphasize economic incentives. Yet, causal evidence of sorting into criminal occupations in response to individual-level variation in incentives is limited. We link administrative socioeconomic microdata with the universe of arrests in Medellín over a decade. We exploit exogenous variation in formal-sector employment around a socioeconomic-score cutoff, below which individuals receive benefits if not formally employed, to test whether a higher cost to formal-sector employment induces crime. Regression discontinuity estimates show this policy generated reductions in formal-sector employment and a corresponding spike in organized crime, but no effects on crimes of impulse or opportunity.