Microcredit and Crime

HECER Discussion Paper No. 315

51 Pages Posted: 29 Mar 2011

See all articles by Khondker Aktaruzzaman

Khondker Aktaruzzaman

Helsinki Center of Economic Research (HECER)

Pertti J. Haaparanta

Aalto University - Department of Economics

Otto Toivanen

Aalto University - Department of Economics; KU Leuven - Faculty of Business and Economics (FBE); CEPR; Helsinki Center of Economic Research (HECER)

Date Written: January 2011

Abstract

We document the level, type, and severity of crime in rural Bangladesh. Crime affected 36% of the households. The average cost of crime was worth two weeks' household consumption. We then study how microcredit affects crime. Our theoretical model shows how microcredit may increase cost of crime at the village level while reducing it for borrowers. We estimate a negative household level and a positive village level effect of microcredit on cost of crime, thus providing evidence that observable private protection against crime generates a negative diversion externality of crime towards other households.

Keywords: borrower, crime, cost of crime, developing country, diversion externality, microcredit, non-borrower, regression discontinuity

Suggested Citation

Khondker, Aktaruzzaman and Haaparanta, Pertti J. and Toivanen, Otto, Microcredit and Crime (January 2011). HECER Discussion Paper No. 315, Available at SSRN: https://ssrn.com/abstract=1793705 or http://dx.doi.org/10.2139/ssrn.1793705

Aktaruzzaman Khondker

Helsinki Center of Economic Research (HECER) ( email )

Ifrane, 53000
Morocco

Pertti J. Haaparanta

Aalto University - Department of Economics ( email )

PO Box 1210
FI-00101 Helsinki
Finland

Otto Toivanen (Contact Author)

Aalto University - Department of Economics ( email )

PO Box 1210
FI-00101 Helsinki
Finland

KU Leuven - Faculty of Business and Economics (FBE) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

CEPR ( email )

London
United Kingdom

Helsinki Center of Economic Research (HECER)

FI-00014 Helsinki
Finland

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