How Offenders and Victims Interact: A Case-Study from a Public Transport Reform

This paper models crime rates as a function of the interaction between potential offenders and victims. I present a simple model of these strategic interactions, and empirically test its basic predictions taking advantages of a reform to the public transport sector in Santiago, Chile (Transantiago). The specific features of this reform allow me to identify the effect of two particular shocks that have clear implications in other crime settings. First, I discuss the extent to which a decline in the use of cash for economic transactions affects crime. Theory suggests that due to the highly liquid nature of cash, places where a large amount of economic transactions are made in cash may have more crime opportunities. I find a large decrease in cash-related robberies coinciding with the replacement of cash fares with a cashless card. This finding is robust to multiple identification strategies. In addition, I study the transition period of Transantiago, prior to the replacement of the payment system, and find a large increase in robbery. During this period compensation structure of bus drivers was required to change from being paid from a portion of revenue to receiving fixed salaries. This particular crime response can be described under a moral hazard framework between bus owners (principal) and drivers (agent) which may have induced a large increase of criminal opportunities.