Residents sharing buildings with affected refugees are markedly more likely to commit crimes
In 2002, Denmark cut welfare benefits for newly arrived refugees by up to 50%. While this policy was aimed at reducing government spending and encouraging faster integration, it also had unintended consequences, reaching far beyond the refugees themselves.
In our recent IZA Discussion Paper, we study these broader social effects. We find that non-Danish residents who lived in the same buildings as affected refugees became significantly more likely to commit crimes in the years that followed.
We base our findings on detailed administrative data covering nearly 13,700 neighbors of refugees. The data track where people live, their income, immigration status, and any criminal convictions over a ten-year period. By comparing neighbors of refugees who arrived just before and just after the July 2002 reform, we can isolate the impact of the benefit cuts. These two groups of neighbors were demographically similar and lived in comparable housing. The key difference was whether the refugees they lived near received full or reduced welfare support.
What we find is striking: for every refugee receiving reduced benefits who was convicted of a crime, an additional 2.67 non-Danish neighbors were also convicted over the next ten years. That is a 57% increase in convictions, compared to neighbors of refugees who arrived before the reform. Interestingly, we find no similar increase in crime among Danish neighbors.
The types of crimes involved include shoplifting, theft, and public order offenses. The spillover effects are strongest when refugees and neighbors come from the same country or speak similar languages. They are also more pronounced among younger, single, and childless individuals, people who are more likely to interact with one another and, in general, are at greater risk of offending.
Why do these spillovers happen? One likely explanation is social influence: when people see others in similar situations turning to crime, it can change their perception of the risks and consequences. We find the effects are larger in areas where criminal behavior historically led to fewer convictions, which supports this idea.
So, what does this mean for public policy? Economists use a tool called the marginal value of public funds (MVPF) to measure how much value society gets for each dollar the government spends. An MVPF of 1 means a dollar spent produces a dollar’s worth of social benefit. If it is less than 1, the spending may not be worth it; if it is more than 1, it adds value.
If we look only at the direct effect on refugees, restoring the cut benefits would have an MVPF of about 0.98; almost break-even. But once we include the cost of increased crime among neighbors, the MVPF rises to around 1.18. If we also factor in unconvicted but reported crimes, it climbs to 1.8. In other words, once we account for spillovers, the benefit cuts end up costing more than they save.
Our research shows that welfare policies have wider consequences than we might expect. Cutting support for vulnerable groups does not just affect those individuals. It can change behavior across entire neighborhoods. These ripple effects should be part of how we think about and evaluate public policy.
© David Carson Jinkins, Elira Kuka, and Claudio Labanca
David Carson Jinkins is Associate Professor of Economics at Copenhagen Business School, Denmark and IZA Research Fellow
Elira Kuka is Associate Professor in the Department of Economics at George Washington University, USA
Claudio Labanca is Assistant Professor of Economics at Monash University in Melbourne, Australia
Please note:
We recognize that IZA World of Labor articles may prompt discussion and possibly controversy. Opinion pieces, such as the one above, capture ideas and debates concisely, and anchor them with real-world examples. Opinions stated here do not necessarily reflect those of the IZA.
Related IZA World of Labor content:
https://wol.iza.org/articles/integrating-refugees-into-labor-markets by Pieter Bevelander
https://wol.iza.org/articles/crime-and-immigration by Brian Bell
https://wol.iza.org/articles/active-labor-market-policies-and-crime by Torben Tranaes
Foto by Misha Yurov on Unsplash