Local natural resources and crime: Evidence from oil price fluctuations in Texas

Abstract

We exploit plausibly exogenous changes in the value of reserves in Texas's giant oil fields to determine the impact of crime in Texas counties that have reserves. Texas provides an ideal setting for this research strategy. First, Texas has the largest number of giant oil fields. Second, Texas's giant oil fields possess the greatest remaining oil potential. Third, giant oil fields are dispersed throughout the state. We find that a 1% increase in the value of oil reserves increases murder by 0.16%, robbery by 0.55% and larceny by 0.18%. Using the estimated elasticities, an average increase in the value of oil reserves (26% increase in the value of reserves) results in a 4.15% increase in murder rates, 8% increase in robbery and 4.7% increase in larceny. These effects are not trivial. We explore potential mechanisms that could be driving this increase in crime and find that an increase in the value of local oil reserves improves the local economic conditions, increases the share of young males, and increases the share of individuals residing in group quarters (e.g. temporary worker housing) of its county with no effect on the local economic conditions, demographic changes or crime rates of adjacent counties.