Crime Reduction from Cashless Welfare Payments

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...the move from check-based welfare payments to EBT payments was associated with a substantial drop in street crime ...

In Less Cash, Less Crime: Evidence from the Electronic Benefit Transfer Program (NBER Working Paper No. 19996), authors Richard Wright, Erdal Tekin, Volkan Topalli, Chandler McClellan, Timothy Dickinson, and Richard Rosenfeld investigate whether the amount of cash circulating within a community affects the crime rate. The researchers take advantage of a significant shift in welfare payment schemes that took place across the United States over the last two decades: replacement of paper checks with a digital debit card-based system, the Electronic Benefit Transfer (EBT) program. Although mandated by the federal government, the transition from paper checks to EBT payments was implemented at the state level, most often on a county-by-county basis. This generated substantial variation in the starting point of EBT adoption in different places. The researchers examine monthly data on various types of crimes from all of the counties in the state of Missouri between 1990 and 2011 to measure the impact on various crimes of reduced circulation of cash resulting from the EBT program. They find that the move from check-based welfare payments to EBT payments was associated with a substantial drop in street crime as measured by either reports or arrests. They observe significant effects for burglary, larceny, and assault, and a weaker effect for robbery.

The authors suggest that the most likely explanation for this finding is that EBT payments reduced the amount of cash on the streets that could be taken or used for illegal purposes. Even though welfare recipients still can withdraw their allotted benefits in the form of cash, EBT payments do not require the complete liquidation of benefits as would be necessary with paper checks. This means that the overall circulation of cash on the streets -- especially among those who are particularly vulnerable to street crime -- must have been reduced following adoption of the EBT program. Furthermore, the old system required a significant proportion of welfare recipients with no access to conventional bank accounts to cash their benefits at independent check-cashing establishments, which are also hot spots of street crime. Because cash is critical to the pursuit of many illicit actions, a decline in cash balances can serve as a brake on the cycle that drives street crime and can affect not just predatory offenses like burglary and larceny, but assaultive disputes that are often linked to the heavy drug and alcohol use associated with participation in street life.

The authors reject the hypothesis that adoption of the EBT program simply displaced crime from one county to another, with potential criminals moving to counties that still relied on paper checks. This finding is consistent with studies indicating that offenders tend to operate within their own geographical awareness space, and it supports the contention that the removal of cash through the EBT program has an enduring negative effect on street crime.

-- Les Picker