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Economics of Gun Violence

Paper Session

Saturday, Jan. 6, 2024 10:15 AM - 12:15 PM (CST)

Grand Hyatt, Texas Ballroom Salon F
This session was streamed live.
Hosted By: American Economic Association
  • Chair: Janet Currie, Princeton University

The U.S. Consumer Firearms Industry: Equilibrium and Policy Implications

Luis Armona
,
Stanford University
Adam Rosenberg
,
Stanford University

Abstract

In this paper, we study how supply and demand determine the allocation of guns
across households in the contemporary United States. Understanding the market struc-
ture of the gun industry may help explain individual gun purchase patterns and develop
policy that mitigates harms from gun ownership. Using a new panel dataset on gun
prices, we document that the significant merger activity in this market during the
2000's by gun manufacturers led to persistent price increases for firearms. Then, us-
ing data from the largest gun auction website, along with the universe of legal gun
transactions in the state of Massachusetts, we estimate demand for legal firearms.
Our demand estimates imply significant demographic heterogeneity in preferences for
gun characteristics, along with low substitution across gun categories. We will then
combine these findings into an equilibrium model relating demand, supply, and public
health outcomes. We will use this model to both quantify the role that market power
plays in observed public health outcomes, and the equilibrium impact of new policy
interventions in the firearms market on public health, such as crime and firearm-related
suicides."

Predicting and Preventing Gun Violence: An Experimental Evaluation of READI Chicago

Sara Heller
,
University of Michigan
Monica P. Bhatt
,
University of Chicago
Max Kapustin
,
Cornell University
Marianne Bertrand
,
University of Chicago
Christopher Blattman
,
University of Chicago

Abstract

Gun violence is the most pressing public safety problem in American cities. We conducted a randomized controlled trial (N = 2,456) of a community-researcher partnership called the Rapid Employment and Development Initiative (READI) Chicago. The program offered an 18-month job alongside cognitive behavioral therapy and other social support. Both algorithmic and human referral methods identified men with strikingly high scope for gun violence reduction: for every 100 people in the control group, there were 11 shooting and homicide victimizations in the 20 months after randomization. There is no statistically significant change in an index combining three measures of serious violence, the study’s primary outcome, during this period. Yet there are signs that this program model has promise. Participants referred by outreach workers—a pre-specified subgroup—show enormous declines in both arrests and victimizations for shootings and homicides (79 and 43 percent, respectively) that remain statistically significant even after multiple testing adjustments. We will also report preliminary results from the post-program period (21-40 months after randomization).

Market Response to Racial Uprisings

Bocar Ba
,
Duke University
Roman Rivera
,
University of California-Berkeley
Alexander Whitefield
,
University of Pennsylvania

Abstract

Do investors anticipate that demands for racial equity will impact companies? We explore
this question in the context of the Black Lives Matter (BLM) movement— the largest racially
motivated protest movement in U.S. history- and its effect on the U.S. policing industry using a
novel dataset on publicly traded firms contracting with the police. It is unclear if BLM would
increase or decrease market valuations of firms that contract heavily with police because of increased
interest in reforming the police and fears over rising crime as well as pushes to “Defund
the Police”. We find that policing firms experienced an increase in stock prices by seven percentage
points relative to non-policing firms in similar industries in the three weeks following
BLM-related events, contrary to the predictions of economics experts we surveyed. In particular,
firms producing surveillance technology and police accountability tools experienced higher returns
following events related to BLM. Furthermore, policing firms’ fundamentals, such as sales,
improved following George Floyd, suggesting that policing firms’ future performances bore out
investors’ positive expectations following BLM events. Despite BLM’s calls to reduce investment
in policing and explore alternative public safety approaches, our research shows how the financial
market translates high-profile violence against Black civilians and calls for systemic change
into shareholder gains and additional revenues for police suppliers.

Discussant(s)
Prashant Bharadwaj
,
University of California-San Diego
Jennifer L. Doleac
,
Texas A&M University
Vicki Bogan
,
Duke University
JEL Classifications
  • I0 - General
  • K0 - General