Unanticipated Policy Externalities and the Economics of Crime [with Anna Getmansky and Guy Grossman]

We study a general equilibrium of crime, leveraging the construction of the Israeli separation barrier—established for reasons unrelated to criminal activity—as a quasi-experimental intervention. The timing of barrier construction was staggered, randomly altering criminal access to some localities before others. Among newly secured localities, the barrier arbitrarily blocked some, but not all, most-preferred smuggling routes. We focus on three empirical results: auto theft in protected localities dropped by 20%; auto theft increased in not-yet-protected localities by 16%; smuggling route blockages further reduced auto theft by as much as 48%. Our results clarify the industrial organization of crime in Israel.



The latest draft is here.