Larceny in the Product Market: A Hidden Tax?

Minimum Wage Pass-through to Wholesale and Retail Prices: Evidence from Cannabis Scanner Data

“…The lack of a competing black market (Hollenbeck and Uetake, 2021) underscores the generalizability of our results. Further support for the broad applicability of our findings comes from a variety of news reports, a recent survey by the National Retail Federation (2022), and from findings of a study by Jackson and Tran (2020), who show that a decreased likelihood of a felony conviction is connected to increased prices for automobiles and computers. These sources highlight that increased crime-related costs are a widespread concern for retailers in numerous sectors, suggesting that these costs are passed on to consumers in a variety of settings.…”

“…Thus, we do not specifically consider fixed costs. 34 The idea of crime as a hidden tax was first mentioned by Jackson and Tran (2020). 35 This assumption is supported by our our main results and our marginal cost pass-through estimates (see Section 7.2).…”

“…Numerous industry surveys suggest that retailers across different industries pass these costs through to consumers U.S. Department of Homeland Security (2022); Dunham (2021). This conjecture is supported by the findings of a study by Jackson and Tran (2020), which reveals that increased felony larceny thresholds are associated with higher prices for automobiles and computers. The generalizability of our results is reinforced by the simi- 4 We conduct several robustness checks that show that our main findings are not sensitive to our choice of estimator or the definition of unaffected local markets.…”

“…Their approach is similar to ours in that they exclude chain stores whose parent company is affected by a tax hike in another state within the event window. 6 The idea of treating crime as a hidden tax was initially proposed by Jackson and Tran (2020). Crime usually also constitutes an idiosyncratic (fixed) cost shock due to stolen or damaged property.…”

“…Using increased security expenditures as an instrument for violent crime in Columbia, Rozo (2018) shows that increased violence leads to lower output and prices, along with a rise in firms exiting the market. Stolkin (2023) links organized drug trafficking to higher consumer prices in Mexico, and Jackson and Tran (2020) finds larceny thefts are positively associated with prices for computers and cars. In contrast to existing studies, we focus on organized retail crime in the U.S. and identify underlying factors behind the rise in retail prices.…”