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Zonder onderwerpscode: economie

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Crime and the durability of goods are strongly connected issues. However, surprisingly, they have been studied separately. This paper explores the relationship between the production of durable goods and crime from a theoretical perspective and draws important conclusions for both topics. Crime affects the consumer and producer surplus and thus the behavior of consumers, firms, the market equilibrium, and, in turn, the social optimum. Lower durability of goods reduces the incentive to steal those goods, thus reducing crime. When crime is included in the standard framework of durable goods, the socially optimal durability level is lower. Even without considering the negative non-market externalities of crime, perfect competition does not provide the optimal durability level. When considering different stealing technologies, perfect competition either over-produces durability or produces zero (minimum) durability. The monopolist under-produces durability regardless of the stealing technology considered. If all the crime externalities are taken into account, the socially optimal durability level is reduced further and gets closer to that which prevails under monopoly. The model presented in this paper implies that the durability of goods, and the market structure for those goods, can be an effective instrument to reduce crime. In particular, making the durability of a good contingent upon that good being stolen is likely to increase welfare.

Zonder onderwerpscode: economie

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Strategies based on growth and inequality reduction require a long-run horizon, and this paper therefore argues that those strategies need to be complemented by poverty alleviation programs. With regards to such programs, informality in Latin America and the Caribbean is a primary obstacle to carry out means testing income-support programs, and countries in the region have therefore mostly relied on proxy means testing mechanisms. This paper studies the relative effectiveness of these and other mechanisms by way of a formal model in which workers choose between job opportunities in the formal and informal sectors. Although the means testing mechanism allows for a more pro-poor design of transfers, it distorts labor decisions made by workers. On the other hand, (exogenous) proxy means testing does not cause distortions, but its pro-poor quality is constrained by the power of observable characteristics to infer income levels. However, since taxation is necessary to fund programs, redistribution becomes less effective, especially for programs other than means testing. The paper concludes by discussing the implications of these results for the design of more efficient targeting programs.