Jesse Bruhn, Brown University. "Competition in the Black Market: Estimating the Causal Effect of Gangs in Chicago"
Department seminar. Jesse Bruhn is an Assistant Professor of Economics at Brown University. He will present the paper Competition in the Black Market: Estimating the Causal Effect of Gangs in Chicago.
I study criminal street gangs using new data that describes the geospatial distribution of gang territory in Chicago and its evolution over a 15 year period. Using an event study design, I show that city blocks which are entered by gangs experience sharp increases in reported batteries (6%), narcotics violations (18.5%), incidents of prostitution (51.9%), weapons violations (9.8%), and criminal trespassing (19.6%); and a sharp reduction in the number of reported robberies (-8%). The findings cannot be explained by pre-existing trends in crime, changes in police surveillance, crime displacement, exposure to public housing demolitions, reporting effects, nor demographic trends. Taken together, the evidence suggests that gangs cause small increases in violence in highly localized areas as a result of conflict over illegal drug markets. I also find evidence that gangs cause reductions in median property values (-$8,436.9) and household income (-$1,866.8). Motivated by these findings, I explore the relationship between the industrial organization of the black market and the supply of criminal activity. I find that gangs that are more internally fractured or that operate in more competitive environments tend to generate more crime. This is inconsistent with simple, market based models of criminal behavior, which suggests an important role for behavioral factors and social interactions in the production of gang violence.