Academic journal article Review of Social Economy

Market and Public Policy Mechanisms in Poverty Reduction: The Differential Effects on Property Crime

Academic journal article Review of Social Economy

Market and Public Policy Mechanisms in Poverty Reduction: The Differential Effects on Property Crime

Article excerpt

In the context of standard neoclassical models of crime, a reduction in poverty, by raising legal earnings of prospective offenders, lowers the relative return to illegal activities (Becker 1968: 177; Ehrlich 1973: 530; Sjoquist 1973: 441; Gillespie 1979: 616). However, a reduction in poverty, by increasing the wealth of criminal targets, increases the relative return to crime (Sjoquist 1973: 445; Danziger and Wheeler 1975: 125; Gillespie 1979: 616).(1) Because of the opposing effects on the relative return to illegal activity, the impact of poverty reduction on property crime is theoretically indeterminate (Gillespie 1979; Deutsch et al. 1992). This theoretical ambiguity is reflected in the corresponding empirical literature (Howsen and Jarrell 1987; Smith and Jarjoura 1988; Patterson 1991).

The argument underlying the empirical research in this paper is that the literature fails to consider the mechanisms, improved market opportunities, cash transfer payments, and in-kind transfer payments, by which poverty may be reduced. The hypothesis is that poverty reductions resulting from increased market earnings, cash transfers, and in-kind transfers have differential impacts on the returns to legal and illegal activity both within and across various types of property crime.

While poverty has often played a major role in the theoretical and empirical analysis of property crime, there has been very little theoretical or empirical analysis of the differential effects on various property crimes of poverty reducing mechanisms. Only three major studies, DeFronzo (1983), Howsen and Jarrell (1987), and Devine et al. (1988), have specifically investigated the effect of public assistance, e.g. AFDC payments and food stamps, on property crime rates, and no consistent effect on property crime has been determined. In addition, no attempt has been made to empirically investigate the differential impacts of market earnings, cash transfers, and in-kind transfers in one overall model. With the transition from cash transfers to programs that encourage employment and, to a secondary extent, in-kind transfers, the effect on crime rates of these three different mechanisms of poverty reduction becomes highly significant.


A reduction in poverty that occurs through a general improvement in employment earnings (rather than government transfer payments) would increase the potential return to legal activity (the earnings effect) for prospective offenders, principally young males. In addition, if offenders are convicted of criminal activity while employed, a higher level of earnings increases the loss to the offender (the conviction effect). However, improved employment earnings also increase the possession of cash and goods by potential victims and thus the returns to criminal activity increase (the wealth effect). In addition, these illegal earnings are not taxed whereas legal earnings are (the tax effect). An improvement in market conditions would, therefore, have opposing effects on the relative return to criminal activity and thus on the rate of property crime.

Poverty reduction generated by transfer payments (rather than market processes) also has opposing effects on the rate of property crime. A critical factor is whether the transfers are provided to potential offenders or victims (DeFronzo 1993: 133; Devine et al. 1988: 412, footnote 8). To the extent that transfer payments accrue directly to prospective offenders, their relative returns to legal activities would rise due to the forfeiture of transfer payments if convicted for committing offenses (the conviction effect). As a result of this conviction effect, some crime abatement should occur.

However, transfer-reduction rates are imposed on individuals attempting to earn legal income while receiving transfer payments (the tax effect). These reduction rates are often larger than the tax rate applied against legal earnings. …

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