Getting Over the Hump : A Theory of Crime , Credit and Accumulation ?

We explore the implications of endogenous credit market imperfections for the relationship between property crime and the process of economic development. In the initial stages of development, property crime rises as the opportunities to gain from illegal activities expand. In later stages, however, crime falls as capital market imperfections are overcome and legal activities become more pro table. We detail the forces which determine whether the crime generated by an economy's early growth will choke o the development process. We also nd that endogenous credit constraints reduce the e ectiveness of public expenditures that raise expected criminal sanctions, and that spending on ex ante crime prevention may be more cost{e ective.