News and noise in crime politics: The role of announcements and risk attitudes

Abstract

We examine the process of intertemporal decision-making among potential offenders by analyzing their response to announcements of future changes in anticrime policies. We specify the utility function of potential criminals based on Epstein-Zin preferences to explicitly account for risk attitudes. In this setting, news shocks in anticrime policies can bring about immediate changes in delinquency, but heterogeneous risk attitudes among potential offenders may cause unintended outcomes in the short run. We further show that short-run effects may solidify in the event that the announced policy changes are not ultimately implemented (noise shocks). We demonstrate that rising uncertainty about policy changes may be beneficial in crime prevention, but only among risk-averse agents. Hence, this paper highlights potential pitfalls that result from neglecting the importance of risk attitudes in crime prevention – and potentially other policies.