Journal of Monetary Economics · 2026 · Ayşe İmrohoroğlu、Cagri Seda Kumru、Jiu Lian
Abstract
This paper documents how racial differences in labor income may simultaneously explain both crime and wealth disparities between Black and White individuals. Using an overlapping generations model that endogenously determines crime rates alongside consumption and savings decisions, we find that equalizing labor incomes results in a significant decline in both the Black crime rate and the proportion of Black individuals in the lowest wealth quintile. Higher crime and incarceration rates of Black individuals, on the other hand, do not significantly contribute to their low wealth. This is primarily because most crimes are committed by already poor and young individuals who are not saving in any case.