Household Health Shocks and Criminal Activity: Evidence from Brazil

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The causal effect of health condition on economic household indicators has been thoroughly studied within academic literature, finding a multitude of different, sometimes contradictory effects within vastly different contexts. Little is known about how such shocks may lead to changes in criminal participation of household members, for example to compensate for the economic loss due to the health shock. In the proposed work, I will aim at filling this gap in the existing literature. Previous research on this question focuses on factors such as BMI or other general indicators of poor health and their impact on a number of different outcomes. Estimating the causal effect of health shocks on criminal involvement is difficult, because of the presence of a number of confounders leading to endogeneity problem. For instance, people in poverty tend to have poorer health condition and simultaneously are more likely to engage in crime which can lead to false conclusions within causal models. To address the underlying endogeneity problem, I will estimate the causal effect of health shocks on the criminal involvement of households in Brazil using exogenous health shock from Chikungunya virus infections while controlling for a number of different fixed-effects. This allows me to use as good as random variation, conditional on a set of fixed-effects to control for the socio-economic environment and individual circumstances, from those infections to estimate the effect of health shocks on criminal involvement. Chikungunya is a mosquito-borne viral infection that causes severe joint and muscle pain. While the acute illness usually only lasts for approximately one or two week(s), around 40% of cases develop a chronic condition lasting several months leading to severe joint pain mostly inhibiting affected individuals to engage in any physical activity. Because of the severe health consequences on the affected individual, the effects may include other household members. For example, if the illness affects the main breadwinner in the household, likely a parent, this may negatively affect the household's labour supply (whether it be the breadwinner falling ill or a resident requiring care) and therefore likely decreasing household income. I will use the very rich information on household income from formal employment, household structure and socio-economic information to investigate the potential underlying mechanisms. In detail I will aim at answering the following research questions: (1) Does the health shock have a causal effect on the criminal engagement of household members including children (2) does the effect vary by demographic characteristics of the individual falling and sick and by the household composition (class, gender, age, location, occupation etc.) estimating heterogeneous effects, (3) to what extent does government sick pay provision and other welfare provisions offset the effects of the health shock on households. This project will be among the first to analyse the effect of health shocks on household criminal engagement using exogenous health shocks that are very well defined. I expect the results of this work to be of interest to the academic community, but also to politicians that need to make decisions on how to respond to health shocks and help households to smooth consumption without resorting to engaging in crime.