Losing by Less? Import Competition, Unemployment Insurance Generosity, and Crime

Abstract

We explore the extent to which increased import competition affected crime in US labor markets between 1990 and 2007, and whether access to unemployment insurance attenuated this relationship. In the average labor market, property crime rates rose by 1.5 percent following a $1000 per worker increase in import competition. Increasing unemployment insurance generosity by one-half of a standard deviation, however, would have mitigated the entire increase. A simple cost-benefit analysis indicates that 7-24 percent of the costs of increasing unemployment insurance generosity were recovered in the form of lower crime rates. This highlights a new and important positive externality of unemployment insurance.

Keywords: Import Competition, Unemployment Insurance, Crime

JEL Classification: F14, F16, H00, J65