Crime, punishment, and background risks

W. Henry Chiu, Paul Madden

Research output: Contribution to journalArticlepeer-review


We show that if the punishment for a property crime effectively eliminates an individual's initial wealth, as with a very long prison sentence, then such criminal activities become less desirable for a risk-averse and prudent individual if his initial wealth distribution undergoes a second-order stochastic dominant improvement. Similar results obtain under additional restrictions if the punishment reduces an individual's initial wealth by some factor less than 1. In a general-equilibrium model where the endogenous victimization risk is part of individuals' background risks, we also show that the availability of insurance for the victimization risk lowers economy-wide crime rates. © 2006 Elsevier B.V. All rights reserved.
Original languageEnglish
Pages (from-to)543-555
Number of pages12
JournalJournal of Economic Behavior and Organization
Issue number4
Publication statusPublished - Apr 2007


  • Background risks
  • Crime
  • Insurance
  • Stochastic dominance


Dive into the research topics of 'Crime, punishment, and background risks'. Together they form a unique fingerprint.

Cite this