How does the organizational structure of law enforcement agencies affect their activities and crime? That organizational structure affects incentives and outcomes is well noted in the literature on the boundaries of the firm, and an extensive literature on the economics of crime considers factors affecting crime. However, no paper has bridged those two literatures. I examine the consequences of a reform which adjusted organizational boundaries between the police and the prison authority in Israel by transferring responsibility for arrestees from the police to the prison authority. Theoretically, what should be the consequences of this organizational reform? The transition of responsibility for arrestees from the Police to the Prison Authority externalizes the cost of housing arrestees from the Police's perspective. It should therefore results in an increase in the number of arrestees. Furthermore, if the police chooses optimally which crimes to pursue, then following the reduction in the cost it faces it should pursue relatively minor crimes that it did not pursue before the reform. Lastly, an increase in the number of arrestees should lead to a decrease in crime as more criminals are held under arrest. My empirical analysis will use rich individual level administrative data on the universe of arrests undertaken in Israel, as well as detailed data on crime. My empirical strategy relies on two important aspects of the organizational reform. First, the reform can be considered exogenous to police activity and crime because the decision to implement it was a direct consequence of the surprise escape of a notorious serial rapist from the hands of the Police. Second, my analysis exploits the staggered timing of the reform across geographical regions of Israel. Initial results already indicate that the reform led to a large increase in the number of arrestees.
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