progress in economics (cont.)

Doug Henwood dhenwood at panix.com
Fri Feb 18 14:30:55 PST 2000


"A Dynamic Model of Differential Human Capital and Criminal

Activity"

BY: NACI H. MOCAN

University of Colorado at Denver

National Bureau of Economic Research (NBER)

STEVE BILLUPS

University of Colorado at Denver

JODY R. OVERLAND

Affiliation Unknown

Document: Available from the SSRN Electronic Paper Collection:

http://papers.ssrn.com/paper.taf?abstract_id=206149

Date: January 2000

Contact: NACI H. MOCAN

Email: Mailto:nmocan at carbon.cudenver.edu

Postal: University of Colorado at Denver

Campus Box 181

PO Box 173364

Denver, CO 80217-3364 USA

Phone: (303)556-8540

Fax: (303)556-3547

Co-Auth: STEVE BILLUPS

Email: Mailto:sbillups at carbon.cudenver.edu

Postal: University of Colorado at Denver

Denver, CO 80217-3364 USA

Co-Auth: JODY R. OVERLAND

Email: not available

Postal: Affiliation Unknown

ABSTRACT:

This paper presents a new, dynamic economic model of criminal

activity. Individuals are endowed with legal and criminal human

capital. Potential incomes in legal and criminal sectors depend

on the level of the relevant human capital, the rate of return,

and random shocks. Both types of human capital can be enhanced

by participating in the relevant sector. Legal human capital can

also be enhanced through savings. Each type of human capital is

subject to depreciation. Individuals maximize expected

discounted lifetime utility, which depends on consumption. In

this two-stage dynamic stochastic model, in each period the

individual decides in which sector to participate (legal or

illegal), and after the realization of income in that period, he

decides on the optimal amount of consumption. A particular

decision (e.g., participation in the criminal sector) has

implications both for future decisions as well as the choices

available to the individual in later periods.

The model allows analyses of the effects of recessions,

neighborhood effects, various imprisonment/rehabilitation

scenarios, risk aversion, and time preferences on criminal

behavior. It provides new insights, which are different from

existing models, and it is able to explain the declining

propensity of individuals to commit crimes over time.

JEL Classification: C61, J24, K42



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