Dismantling a market for stolen goods: Evidence from the regulation of junkyards in Brazil

This paper investigates the impact of monitoring and market regulation on the illicit market for stolen goods, focusing on the association between junkyards and auto theft. I explore the effects of a state-level regulation implemented in São Paulo in 2014, which enhanced supervision of the market for auto parts. I find an 8.11% decline in auto theft for municipalities presenting at least one junkyard specialized in auto parts compared to the control group. Additionally, I provide evidence of a meaningful decrease in vehicle insurance prices, suggesting tangible economic benefits for citizens as a result of lower crime rates. These findings offer crucial insights into market regulation as a crime deterrence strategy to reduce the trade of stolen goods, highlighting its complementarity with traditional public security policies. • This study focuses on market regulation as an effective strategy to tackle crime. • Leveraging technology to enforce traceability increases the costs of illicit trade. • Strengthening regulation in legal markets can limit illegal transactions. • A new regulation for the market for auto parts led to an 8.11% decline in auto theft • The drop in auto-theft has not been followed by increases in other crimes.