Knowledge that Transforms

This paper empirically examines belief updating of the perceived probability of arrest and its criminal deterrence effects using two longitudinal data sources. While beliefs about the probability of arrest are positively correlated with local official arrest rates, they are unresponsive to information acquired from random individuals and local neighborhood conditions. Importantly, perceptions respond to changes in an individual's criminal and arrest history. Young males who engage in crime without getting arrested revise their perceived probability of arrest downward, while those who are arrested revise their probability upward. Estimates suggest that beliefs about the probability of arrest significantly deter crime.

We examine the effect of the Worker Profiling and Reemployment Services system. This program “profiles” Unemployment Insurance (UI) claimants to determine their probability of benefit exhaustion and then provides mandatory employment and training services to claimants with high predicted probabilities. Using a unique experimental design, we estimate that the program reduces mean weeks of UI benefit receipt by about 2.2 weeks, reduces mean UI benefits received by about $143, and increases subsequent earnings by over $1,050. Most of the effect results from a sharp increase in early UI exits in the treatment group relative to the control group.