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Working Paper 2007-046B

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"Urban Crime and Labor Mobility"
by Subhayu Bandyopadhyay, Santiago Pinto, and Christopher H. Wheeler

We present a model of crime where two municipalities exist within a metropolitan statistical area (MSA). Consistent with the literature, local law enforcement has a crime-reduction effect and a crime diversion effect. The former confers a spillover benefit to the other municipality, while the latter a spillover cost. If the net spillovers are positive (negative), then the respective Nash enforcement levels are too low (high) from the perspective of the MSA. When we allow for Tiebout type mobility, labor will move to the location offering lower disutility of crime (including the tax burden). To attract labor, both jurisdictions would like to reduce the relative amount of crime that exists in their municipality. Interestingly, this could raise or reduce enforcement compared with the immobility case. If it was too high (low) under immobility, it will be raised (reduced) further under mobility. In the symmetric case, neither can gain any labor, but the competition for it pushes the jurisdictions further away from the efficient (cooperative) outcome. Thus, mobility is necessarily welfare reducing. We also consider asymmetry in the context of differences in efficiency of enforcement. The low-cost municipality has the lower crime damage (inclusive of the tax burden) and attracts labor. Mobility is necessarily welfare reducing for the high-cost municipality and for the MSA, but it has an ambiguous effect on the low-cost municipality.

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Category > Applied Microeconomics
Category > Regional Economics
Author > Subhayu Bandyopadhyay
Author > Christopher H. Wheeler