After mass layoffs criminal prosecutions increase for displaced workers, but eligibility for unemployment benefits offsets this effect

Read “The Effect of Job Loss and Unemployment Insurance on Crime in Brazil” by Diogo G. C. Britto, Paolo Pinotti & Breno Sampaio here.

Economic downturns and increased unemployment foster conditions that can increase the likelihood of displaced workers engaging in criminal activity. In this VoxDevTalks, Diogo G. C. Britto and Paolo Pinotti join us to discuss their work with Breno Sampaio in which they study the relationship between employment and criminal behaviour using extremely detailed data on male workers in Brazil. They compare the criminal behaviour of workers displaced in mass layoffs with a matched control group of those who were not displaced, and find that for displaced workers, the probability of committing a crime increases by 23% after dismissal, an increase which holds when considering economically motivated or violent crimes. Interestingly, this effect is driven by young and low-tenure workers, with effects not varying with worker earnings and education. For policymakers, a key takeaway from their results is that unemployment benefits completely offset the potential increase in crime upon job loss, but this effect disappears when benefits expire.

Job loss Crime Unemployment insurance Brazil