Crime , Punishment , and Social Expenditure

Criminal activity can be controlled by punishment, and by social expenditure both on enforcement and redistributive transfers which increase the opportunity cost of imprisonment. Individuals may diier in the combinations of these policies that they prefer. We study the dependence of these preferences on the individuals' characteristics and the nature of the crime under consideration. A political mechanism determines the policy adopted by society. Diierences in the policies adopted across societies are explained by the nature of the political mechanism and the initial distribution and level of incomes. Aloysius Siow inspired our interest in this topic. We are very grateful to him for many discussions. We are also grateful for comments from Orley Ashenfelter,