An Empirical Analysis of Identity Theft Determinants in the U.S

Cebula, Richard J., Koch, James V., Unemori, Mary Ann, Review of Business Research

ABSTRACT

This study finds that ID theft rates tend to be an increasing function of the unemployment rate and the proportion of the population concentrated in urban areas, and a decreasing function of the relative amount of resources devoted to law enforcement and the percentage of individuals who claim a religious affiliation. We also find ID theft to be an increasing function of the extent of undocumented immigration. Internet access, on the other hand, is found to negatively impact the incidence of ID theft, underscoring the decisive role of immigration and economic variables as determinants of ID theft. Educational attainment in the U.S. does not seem to be a factor.

Keywords: Identity Theft; Undocumented Migration; Economic Factors; Urbanization

1. INTRODUCTION

In the U.S., Cyber crime has grown dramatically in recent years (New York Times, 2006), and identity theft is one of its most pernicious manifestations (Federal Trade Commission, 2006). Criminals who illegally assume the identity of another individual ("ID theft") usually do so for one or more of the following three reasons. They intend: (1) to steal the victim's financial assets; (2) to obtain goods and services under false pretenses, i.e., without paying; or (3) to use the victim's identity as a "cover" for other forms of their activities.

With respect to reason (3), undocumented immigrants may be among the major offenders, or at least this is what Michael Chertoff, the Homeland Security Director declared in December 2006 (Swarns, 2006). Chertoff argues undocumented immigrants may engage in ID theft so they can obtain someone else's social security number, thus enabling them to obtain and hold a job, open bank accounts, obtain a driver's license, and so forth.

Another commonly asserted hypothesis with respect to ID theft is that it is a creature of the Internet. A Washington Post reporter put it this way: "Few Internet security watchers believe 2007 will be any brighter for the millions of fraud-weary consumers already struggling to stay abreast of new computer security threats and avoiding clever scams when banking, shopping, or just surfing online" (Krebs, 2006).

In this study, we use state-level data to identify possible determinants of ID theft rates in the U.S. We treat ID theft rates as a function of economic conditions, the urban vs. rural nature of the environment, law enforcement expenditures, religious adherence, Internet access, the extent of undocumented immigration, and education. Interestingly, consistent with Mr. Chertoff's assertion, we find that the percentage of undocumented immigrants in a state is a highly significant predictor of the incidence of that state's ID theft; moreover, this variable also has by far the largest beta coefficient in our predictive equation. Hence, whereas more work certainly needs to be done on this subject, it appears that there is some validity to the notion that the most common forms of ID theft are immigration driven and therefore relate to the need of undocumented immigrants to obtain legitimate credentials that will enable them to hold jobs in the U.S., obtain driver's licenses and bank accounts, and the like.

2. WHAT IS IDENTITY THEFT?

The Identity Theft and Assumption and Deterrence Act, U.S. Public Law 105-318 (1998), identifies an ID thief as someone who:

    ... knowingly transfers or uses, without lawful authority, any name
    or number that may be used, alone or in conjunction with any other
    information, to identify a specific individual with intent to
    commit, or to aid and abet, any unlawful activity that constitutes
    a violation of Federal law, or that constitutes a felony under any
    applicable State or local law.

This definition of ID theft is purposely broad and seemingly was designed to deal with unforeseen circumstances brought about by technology. As we shall now see, much that relates to ID theft depends upon interpretation.

3. THE INCIDENCE AND REPORTING OF IDENTITY THEFT

Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: An Empirical Analysis of Identity Theft Determinants in the U.S. Contributors: Cebula, Richard J. - Author, Koch, James V. - Author, Unemori, Mary Ann - Author. Journal title: Review of Business Research. Volume: 7. Issue: 6 Publication date: November 2007. Page number: 1+. © 2008 International Academy of Business and Economics. COPYRIGHT 2007 Gale Group.

This material is protected by copyright and, with the exception of fair use, may not be further copied, distributed or transmitted in any form or by any means.