Street Crime and Street Culture

A model of social interactions shows why and when reputation concerns may support an ‘underclass’ culture of street crime where the incentives for such behavior are otherwise weak. Those who do not gain from street crime directly nevertheless find it optimal to invest in violence and thereby build a reputation that will earn them deference from the rest of the community. Even when the fraction of the population with a direct interest in street crime is small a larger proportion may necessarily participate in violence in pursuit of reputation. The model reveals a welfare tradeoff between the gains from information revelation and the costs of reputation-based violence. The model also shows how the social structure of a community interacts with local returns to crime to determine the value of a street reputation and therefore street crime. (JEL D80, Z10, L14) ∗I thank Elijah Anderson, Luis Araujo, Jan Eeckhout, Hanming Fang, Johannes Hörner, Justin Johnson, Antonio Merlo, Olivia Mitchell, Ted O’Donoghue, Nicola Persico, Lones Smith and especially George Mailath and Andrew Postlewaite for many helpful comments and discussions. I gratefully acknowledge financial support from the Social Science Research Council. †319 Lorch Hall, 611 Tappan St., Ann Arbor, MI 48109-1220. Email: [email protected]