Search for a theory of organized crimes

Casual empirical observations reveal no systematic relationship between the overall crime rate and organized criminal activity. We develop a search-theoretic framework to study the interactions not only between formal labor and crime sectors but also between individual and organized crimes. In equilibrium, individual and organized criminals face different arrest risks, success rates, reward structures and outside options. We characterize agents' “occupational choices,” the gang's hierarchical structure and the responses of unemployment, crime rates and crime composition to changes in labor-market conditions and crime-deterrence policies. We further assess the effectiveness of arrest versus punishment policies in deterring individual and organized crimes.