This paper develops a dynamic life-cycle equilibrium model of crime with hetero-geneous agents and human capital … accumulation. Agents decide at each point in time whether to commit crimes by comparing potential gains from crime to the expected … cost of punishment (determined from the probability of apprehension, the utility cost of incarceration, and reduced future …

side. We use the model to investigate the welfare effects of discrimination (also known as risk selection). We postulate … find that aggregate surplus decreases when risk aversion is high. When risk aversion is low however, discrimination …