DEBT PROBLEMS AND CRIME*

• Author: MIKKO AALTONEN,JANNE KIVIVUORI,ATTE OKSANEN
• Published date: 01 May 2016
• Date: 01 May 2016
• DOI: http://doi.org/10.1111/1745-9125.12103

DEBT PROBLEMS AND CRIME∗

MIKKO AALTONEN,1ATTE OKSANEN,2

and JANNE KIVIVUORI1

1Institute of Criminology and Legal Policy, University of Helsinki

2School of Social Sciences and Humanities, University of Tampere

KEYWORDS: debt problems, debt default, types of crime, within-individual analysis

The few existing studies on the association between debt problems and crime have

suggested that the two are correlated, but the causal nature and direction of this associ-

ation has been unclear. By using longitudinal register data (N=20,696) from Finland

on young adults’ debt default and crime, we examine the potentially reciprocal asso-

ciation between debt problems and crime with both cross-sectional and longitudinal

models. Debt problems and crime have a strong association in the data, which persists

after controlling for several measures of socioeconomic status. The longitudinal anal-

yses using fixed-effects regression models show that levels of crime are higher during

periods of debt enforcement, ruling out stable between-person heterogeneity as the sole

cause. The final analysis examining the exact timing of new debt defaults and crime

shows signs of a mutually reinforcing association; the rate of newly enforced debt

increases in the months preceding the first crime leading to a conviction and contin-

ues to increase afterward mostly because of criminal monetary sanctions left unpaid.

The conclusion of the analysis is that debt problems have a dynamic association with

criminal offending. We discuss the difficult barrier that unpaid debts pose to offenders

seeking to desist from criminal activity in the current Finnish context.

The association between different dimensions of socioeconomic attainment and crime

is a classic and contested theme in criminological literature (Dunaway et al., 2000; El-

lis and McDonald, 2000; Tittle, Willemaz, and Smith, 1978). Of the different measures,

the mutual associations between employment and crime have arguably received the most

attention in recent years (Skardhamar and Savolainen, 2014). Although financial diffi-

culties are among the possible mediating mechanisms linking unemployment to crime,

informal social control (Laub and Sampson, 2003) and routine activities (Osgood et al.,

1996) are other potential candidates that have a strong foothold in the literature. Thus, the

role of financial difficulties in crime causation is not settled. Recently, Felson et al. (2012)

used a direct measure of financial stress to examine how difficulty making ends meet cor-

relates with criminal offending in a sample of inmates, finding that financial stress had a

positive time-varying association with both drug dealing and property crime. Elsewhere,

∗This study was funded, in part, by the Academy of Finland (grant number 268153). The authors

wish to thank Olli-Pekka Aaltonen for compiling the data and the anonymous reviewers for thor-

ough and helpful feedback.

Direct correspondence to Mikko Aaltonen, Institute of Criminology and Legal Policy,

University of Helsinki, Unioninkatu 40, P.O. Box 24, 00014 Helsinki, Finland (e-mail:

mikko.aaltonen@helsinki.fi).

C2016 American Society of Criminology doi: 10.1111/1745-9125.12103

CRIMINOLOGY Volume 54 Number 2 307–331 2016 307

308 AALTONEN, OKSANEN & KIVIVUORI

financial problems (Shah, Mullainathan, and Shafir, 2012) have been shown to impact

several domains of human life causally, including cognitive capacity (Mani et al., 2013),

pointing at mechanisms by which financial problems can impair decision making and im-

pact future life outcomes.

One objective marker of financial problems is a debt default, which results from unpaid

bills or loan installments. Most societies have an official legal mechanism or governmen-

tal institutions for the purpose of collecting money or property equivalent to the overdue

debt (Djankov et al., 2008), and financial institutions in the private sector hold such infor-

mation as well. Consumer and household debt have increased rapidly in recent decades

(Patel, Balmer, and Pleasence, 2012; Russell, Whelan, and Maˆ

ıtre, 2013), making a larger

share of the population susceptible to potential issues resulting from the failure to pay

debts. However, the role of debt defaults—or “debt problems,” to use a more general

term—in crime causation has not been thoroughly analyzed in the criminological litera-

ture. A recent systematic review (Hoeve, Stams, et al., 2014) identified only eight studies

that have examined associations between debt problems and crime, noting a particular

lack of longitudinal studies that could introduce proper controls for unobserved hetero-

geneity. Although these studies generally have shown a strong association between debt

problems and crime, without strong controls for selection bias, such results might instead

reflect unmeasured factors such as low self-control, which has been shown to be associ-

ated with both financial problems and crime (Moffitt et al., 2011). In short, the causal role

of debt problems in criminal activity is an open question.

Although socioeconomic status (SES) and debt are correlated (Hoeve, Jak, et al., 2014;

Oksanen, Aaltonen, and Rantala, 2015), we believe that debt problems have some par-

ticular features that make them relevant to the study of both causes and consequences of

crime. The first relates to the way we measure social disadvantage in criminological stud-

ies. When compared with measures such as education, occupation-based social class, or

personal income, debt problems provide a more proximal and concrete measure for acute

financial problems. Especially when measured at short temporal intervals, such measure-

ments will provide a good test for mechanisms suggested in general strain theory (Agnew,

2006) or the instrumental response/rational choice framework (Felson et al., 2012). As an

amount of unpaid debt can basically grow without set limits, it is also a better indicator for

worsening financial situation than employment status or low income. At the same time,

it is important to acknowledge that being in debt is not equal to being poor (Oksanen,

Aaltonen, and Rantala, 2015).

Although improving measurement is important, a more specific facet of debt problems

relates to explanations of continuity in offending. Debt problems are likely to worsen as

a consequence of crime and sanctions (Harris, Evans, and Beckett, 2010), for instance,

when criminal fines and damages are left unpaid or when incarceration leads to forced

absence from the labor market. Loss of credit rating resulting from debt enforcement

can make it more difficult to find a rental apartment and to get new credit, among other

things (Harris, Evans, and Beckett, 2010). In this sense, debt problems are one concrete

example of a “snare” (Moffitt, 1993) that crime and criminal sanctions cause and may

contribute to a process of cumulative disadvantage (Sampson and Laub, 1997), which

ultimately increases the risk of future crime. The role of debt problems in such processes

is an unexplored question.

The aim of the current study is to examine the reciprocal association between debt

problems and crime while accounting for between-individual stable heterogeneity. If the

mechanisms discussed exist, debt problems might have a specific role in criminal behavior