Oslo Summer School in Comparative Social Science Studies 2002


Economic Analysis of Illegal Activities

Lecturer: Professor Antonio Merlo,
University of Pennsylvania, USA
Dates: 5. - 9. August 2002


Objectives
Since Becker's seminal contribution in the 1960s, the economic analysis of crime and other illegal activities has become a fast growing area of research in economics. As crime has escalated to become one of the most important public-policy issues in developed countries, so too has the debate over alternative crime-control policies. At the center of this debate is the relation between individual economic opportunities, public policies, and crime. In this course, data analysis, theoretical models, and empirical methods will be used to study the relation between individual characteristics, economic conditions, public policies, and crime.


Outline of Lectures

Lecture 1: Introduction to the Economic Analysis of Crime and Other Illegal Activities
The first lecture will introduce the topics covered in the course and present an overview of the issues that will be addressed and the tools that will be used.


Lecture 2: An Overview of the Data and the Stylized Facts on Crime
The second lecture will be devoted to the analysis of the data. Individual-level and aggregate evidence will be presented. Important issues related to the use of existing data sets and the methodology of empirical work on the economics of crime will be discussed.


Lecture 3: Partial Equilibrium Models of Crime
This lecture will be devoted to the analysis of static, partial equilibrium models of criminal behavior starting from the Becker paradigm. The focus of the lecture will be on the individual decisions to engage in criminal activities. Theoretical results and empirical implications will be presented and discussed.


Lecture 4: General Equilibrium Models of Crime
This lecture will be devoted to the analysis of static, general equilibrium models of criminal behavior. The focus of the lecture will be on the role of markets and equilibrium aggregation in the economic analysis of criminal activities. Theoretical results and empirical implications will be presented and discussed.


Lecture 5: Dynamic Models of Crime
This lecture will be devoted to the analysis of dynamic, partial and general equilibrium models of criminal behavior. The emphasis of this lecture will be on the importance of dynamic considerations for the study of criminal careers and the analysis of time series evidence. Theoretical results and empirical implications will be presented and discussed.


Lecture 6: Stigma, Recidivism and Crime
In this lecture, the issue of "stigma" and its consequences on recidivism will be analyzed. Important issues related to modeling stigma in economic environments with incomplete information and empirically assessing the extent of stigma will be discussed.


Lecture 7: Political Economy Models of Crime Prevention
This lecture will be devoted to the analysis of political economy models of crime and punishment. The focus of the lecture will be on the endogenization of crime-control policies through the political process. Theoretical results and empirical implications will be presented and discussed.


Lecture 8: An Overview of the Data and the Stylized Facts on Corruption
This lecture will be devoted to the issue of corruption. Several definitions of corruption and their economic implications will be discussed. Cross-section and time-series evidence on corruption will be presented.


Lecture 9: Game Theoretic Models of Corruption
This lecture will be devoted to the study of the effects of institutions on the emergence of corrupt behavior when agents behave strategically. An application to government corruption will be presented.


Lecture 10: What have we learned?
The last lecture will be devoted to summarizing the main lessons learned in the course and discussing the main open questions in the literature.


Basic readings


Articles


The Lecturer
Antonio Merlo is the Lawrence R. Klein Professor of Economics and the Director of the Penn Institute for Economic Research (PIER) at the University of Pennsylvania. Before joining the Economics faculty at the University of Pennsylvania, Professor Merlo taught at the University of Minnesota and New York University. His areas of specialty are political economy, bargaining theory, and the economics of crime.

He has published numerous articles in the leading journals in the profession, including the American Economic Review, Econometrica, the Journal of Political Economy, and the Journal of Economic Theory. He is an Associate Editor of the Journal of Economic Theory and the Review of Economic Dynamics, and is on the Editorial Board of the International Economic Review.