RATIONAL CRIMINALS: When the price of gold rises, burglars target UK neighbourhoods with more Asian families
16 Apr 2019
When the price of gold goes up, burglars become more active in UK neighbourhoods with a greater share of Asian families. That is the central finding of research by Nils Braakmann, Arnaud Chevalier and Tanya Wilson, to be presented at the Royal Economic Society's annual conference at the University of Warwick in April 2019.
Their study notes British Crime Survey evidence that Asian households have stronger preferences than others for holding gold, mostly in the form of jewellery. Analysing detailed crime data, the researchers show that an increase in the price of gold by £100 leads to a 1% surge in burglaries in neighbourhoods with a greater share of Asian households. In neighbourhoods with the 10% highest share of Asian households, which can therefore be more clearly identified as Asian neighbourhoods by burglars, the effect is almost three times larger.
The study starts from a fundamental question in the economics of crime: are criminals rational? In his groundbreaking theory of 1968, Nobel laureate Gary Becker rationalised the behaviour of criminals, and highlighted that individuals engage in crime only if the returns, adjusted for the risk of apprehension, are greater than the returns from engaging in legal activities.
This research provides an innovative way of testing this analysis using variation in the financial returns to committing crime. Testing Becker’s model has proved difficult as variation in criminal activity tends to affect the return to crime. For example, when more phones are stolen, the retail value of stolen phones drops.
Instead, the researchers rely on variations in the price of gold and assess how this affects burglary in England and Wales. Since the gold price is set on international markets, it is unlikely to vary with the behaviour of burglars in England and Wales. These price variations are thus akin to an experiment where the returns to criminal activity vary independently of the burglars’ activity.
The researchers’ hindsight is that different communities in the UK have different preferences for holding gold, mostly in the form of jewellery. Anecdotal evidence, supported by the British Crime Survey, suggests that Asian households are more likely to have gold assets. Thus, when the price of gold goes up, the returns to burglary of an Asian household increases and it would be expected that rational burglars target these households.
Recognising a house as belonging to an Asian family might be difficult, but recognising a neighbourhood as hosting more Asian households is easier. Thus, it should be expected that when the price of gold goes up, burglars become more active in neighbourhoods with a greater share of Asian families.
Using detailed crime data at the neighbourhood level, the researchers indeed find that an increase in the gold price by £100 leads to a 1% surge in burglaries in neighbourhoods with a greater share of Asian households. In neighbourhoods with the 10% highest share of Asian households, which can be more clearly identified as Asians by burglars, the effect is almost three times larger.
One concern might be that the price of gold is correlated with economic conditions in the UK and might thus have a direct effect on crime. This is an unlikely explanation for the results since the researchers compare neighbourhoods within the same local authority, finding that only neighbourhoods with a higher share of Asian households see an increase in the burglary rate.
Altogether, the results suggest that burglars are rational and redirect their efforts towards neighbourhoods with higher returns. With this knowledge, police resources directed towards overtly visible police patrols specifically around areas rich in potential targets when prices of specific goods are high, may prove a successful deterrent.
Asian Gold - Expected Returns to Crime and Thieves' Behaviour by Nils Braakmann (Newcastle University), Arnaud Chevalier (Royal Holloway, University of London and IZA) and Tanya Wilson (University of Glasgow and IZA)
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