SMU SOE Seminar Series (February 9, 2026): Criminal Thresholds and Spillovers to Local Business: Evidence from Felony Theft Reforms

TOPIC:

ABSTRACT

While theft incentives vary continuously with the value of goods stolen, criminal law maps this behavior into discrete categories through statutory thresholds. We examine whether such thresholds, which are known to shape criminal behavior, also generate spillovers to private-sector activity. Exploiting staggered increases in felony theft thresholds across U.S. states, we study effects on the incidence and compo- sition of theft and on local business activity. National evidence from 2001–2014 shows a gradual decline in theft following threshold increases.

However, incident-level data from Chicago reveal that this aggregate decline masks a sharp rise in below-threshold thefts. This compositional shift toward lower-value, more frequent incidents is associated with higher business exit rates, particularly among high-value and cash-intensive businesses. Overall, our findings indicate that reforms to statu- tory thresholds can generate spillovers to business dynamics through changes in the composition of criminal activity.