Essays on Crime, Punishments, and Inequality

Kaila's dissertation consists of an introductory chapter and three independent essays on the economics of crime and labor economics. The first chapter provides a brief introduction to the economics of crime and summarizes the essays. 

In the second essay, I study the impact of income-based criminal punishments on crime. In Finland, speeding tickets become income-dependent if the driver's speed exceeds the speeding limit by more than 20 km/h, leading to a substantial jump in the size of the speeding ticket. Contrary to predictions of a traditional Becker model, individuals do not bunch below the fine hike. Instead, the speeding distributions are smooth at the cutoff. However, I demonstrate that the size of the realized speeding ticket has sizable but short-lived impacts on reoffending ex-post. I use a regression discontinuity design to show that fines that are 200 euros larger decrease reoffending by 20 percent in the following six months. After 12 months, the effect disappears. My empirical results are consistent with an explanation that people operate under information frictions. To illustrate this, I construct a Becker model with misperception and learning that can explain all the empirical findings.

The third essay studies the impacts of punishments assigned in Finnish district courts. It is joint work with Kristiina Huttunen and Emily Nix. Most criminal justice systems use a "ladder of punishments" that starts with less severe punishments and progresses to more severe punishments according to crime severity and criminal history. Using random assignment to judges, we estimate causal impacts of three common punishments on the ladder–fines, probation, and prison–on defendants' criminal and labor market outcomes. We find that fines increase recidivism. However, this increase is concentrated among those committing less severe crimes. Probation decreases recidivism for those committing less severe crimes and first offenders. Neither fines nor probation affect earnings. Prison has a mixed impact, decreasing future charges but also decreasing earnings.

The final essay investigates the link between job loss and intergenerational inequality. The essay is joint work with Krista Riukula and Emily Nix. Children's and parent's incomes are highly correlated, yet little is known about how or if early labor market shocks contribute to this correlation. This study focuses on a consequential labor market shock: job loss. We document three new results. First, adult children born into the bottom 20% of the income distribution have double the unemployment compared with those from the top 20%, with 118% higher earnings losses. Second, this increases the rank-rank correlation 34% for those impacted. Third, richer parents invest more in their children after job loss, on top of childhood investments providing greater resilience to job loss.

Contact Martti Kaila

Email: martti.kaila@helsinki.fi
Website: https://marttikaila.com/