Abstract
Moral concepts affect crime supply. This idea is modelled assuming that illegal activities is habit forming. We introduce habits in an intertemporal general equilibrium framework to illegal activities and compare its outcomes with a model without habit formation. The findings are that habit and crime presents a non linear relationship that hinges upon the level of capital and habit formation. It is possible to show that while the effect of habit on crime is negative for low levels o habit formation it becomes positive as habits goes up. Secondly habit reduces the marginal effect of illegal activities return on crime. Finally, the effect of habit on crime depends positively on the amount of capital. This could explain the relationship between size of cities and illegal activity.
Highlights
“Those, on the contrary, who have had the misfortune to be brought up amidst violence, licentiousness, falsehood, and injustice; lose, though not all sense of the impropriety of such conduct, yet all sense of its dreadful enormity, or of the vengeance and punishment due to it
We introduce habits in an intertemporal general equilibrium framework to illegal activities and compare its outcomes with a model without habit formation
The findings are that habit and crime presents a non linear relationship that hinges upon the level of capital and habit formation
Summary
“Those, on the contrary, who have had the misfortune to be brought up amidst violence, licentiousness, falsehood, and injustice; lose, though not all sense of the impropriety of such conduct, yet all sense of its dreadful enormity, or of the vengeance and punishment due to it. The existence of habit formation due to factors such as social interactions may affect the behavior of agents in crime supply Factors such as culture or religion provide social incentives that may induce habits in illegal activeties. The habit formation hypothesis has been applied in many issues such as endogenous growth models [9], cyclical consumption [10], aggregate savings [11], money and growth [12], environment [13], fiscal policy [14] and monetary policy [15,16], to mention a few. In this paper we assume that social incentives create an ethic that affects the number of hours allocated to criminal activities by a representative agent. This is modelled by assuming that crime is habit forming.
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