Crime as a Social Cost of Poverty
and Inequality: A Review Focusing
on Developing Countries
F. Bourguignon
tall in (H)I1 or more. That part of the social cost of these events which goes
through crime may be inferred from the figures appearing in Table 2. If
nothing is done to increase crime deterrence, then the bottom half of the
table has no reason to change. However, all of the top half is likely to
increase proportionally to the crime rate. In a 'middle-crime country like
the us, this would entail a social cost approximately equal to 0.6 per cent
of G1)P. In 'high crime’ countries like many Latin American countries, the
cost would be above 2 per cent of GDP. Moreover, if one takes into account
that the increase in criminality is likely to concentrate in large
metropolitan areas, then the local social cost in these areas should be
much larger. These arc not small effects. Note also that they are likely to
be magnified by hysteresis. Overall, these potentially are major effects.
One could think that an active crime deterrence policy could reduce the
preceding cost of unequal development or recessions. In that case, it is
the bottom of Table 2 that will be modified. The extent of modification
depends on the efficiency of crime deterrence. IIowevcr, there might not
be very much to gain. The situation of the US in the 1980s is illustrative of
this. As recalled above, it is likely that the potential increase in criminality
which could be expected from the dramatic fall in the real income of low-
skilled workers was offset by a drastic increase in the incarceration rate,
which more than doubled since 1980. If this is the ease, then, approximately
half the opportunity cost of incarceration, and that part of the budget of
criminal justice which covered the direct cost of that policy, e.g. the cost
of prisons, must be considered as a price that society had to pay for
increasing inequalities. It may be seen that the resulting figure is not far
from the hypothetical 0.6 per cent that would have been observed if crime
had been left increasing.
Inequality and the Demand for Safety
It would be interesting to analyze the determinants of crime deterrence
measures with the same cross-sectional and longitudinal tools as crime
itself. This would permit putting into evidence the role played by’ social
structures, inequality in particular, which is probably essential.
Unfortunately the relevant data for such analysis are missing.
Interesting evidence is provided in a recent study1 byr Pradhan and Ravallion
(1998) in the case of Brazil. Drawing on subjective evaluations of the
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