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 …

abnormal returns found in the literature seem to be exaggerated by more than three times. Hence, the "punishment" effect …