A new study has found that paying welfare benefits via debit card, rather than cash, caused a 10 percent drop in crime.

Researchers have long noted that cash plays a critical role in street crime, due to its liquidity (it's easy to access and everyone accepts it) and anonymity (it leaves no paper trail). In poorer neighborhoods, public assistance payments used to be a significant source of circulating cash: recipients would cash their assistance checks at the bank, pocketing the money and making them attractive targets for criminals.

But starting in the 1990s that changed, as the Federal government gradually phased out paper welfare checks in favor of electronic debit cards (the Electronic Benefit Transfer (EBT) program). Along with a team of researchers, Richard Wright of the University of Missouri studied the effects of this change in his home state and found that it was directly responsible for a hefty 10 percent drop in the overall crime rate there.

The graphic below looks at crime trends in Missouri before and after the switch from cash to debit cards, for all crimes and broken down by individual crimes. In most crime categories the change before and after the switch is striking - upward trends in assault, burglary, car theft and robbery are completely reversed.

The authors ran some more robust regression analysis and found that "burglary, assault, and larceny decreased by 7.9 percent, 12.5 percent, and 9.6 percent, respectively." To double-check their work, they looked at arrest rates and found that corresponding drops in arrest rates supported their findings. They also looked at the incidence of rape, which showed little change pre- and post-EBT switch. Because rape is "typically unrelated immediate acquisition of cash," this didn't come as a surprise.

To put these results in perspective, the overall 10 percent decrease in crime corresponded to 47 fewer crimes per 100,000 people per county per month as a direct result of switching welfare benefits from cash to credit. This finding is fairly astonishing and raises some interesting questions.

First, did the drop in crime occur simply because criminals decided to pack up and move elsewhere? The authors tested for this and found no evidence that criminals simply switched counties, noting that this finding was "consistent with criminological literature indicating that offenders tend to operate within their own geographical awareness space."

Second, what if we expand the definition of "elsewhere" to include virtual as well as physical space? It stands to reason that a shift from paper to electronic currency would cause a concomitant shift from physical to virtual crime - if criminals can't pick your pocket, maybe they'll figure out how to pick your bank account. Wright's study didn't dig into these questions, but as society gradually shifts from physical to virtual currency in bitcoins and beyond, they will become increasingly crucial. For a smart take on implications for cyber-crime, read Brian Fung's post over at The Switch.

Finally, to what extent can we extrapolate from these findings nationally? Wright and his co-authors tantalizingly note that the widespread drop in crime in the U.S. over the past several decades corresponds to a decline in the proportion of transactions involving cash. While there are a wide variety of explanations for this, the paper notes that "a significant fraction of the decline has yet to be identified empirically." While a lot more research is needed on this questions, Wright's paper strongly suggests that less cash = less crime.