Economics of Crime
Economics of Crime
The recent interest in the economics of crime has been stimulated by the serious increase in crime rates in the western world on the one hand, and by recent demographic and socio-economic problems like youth unemployment, migration and increasing inequality on the other. The aim of the project was to investigate empirically if there is a relation between the emergence of crime and the development of demographic and socio-economic factors. The empirical investigations are based on the traditional Becker-Ehrlich deterrence model, but we analyse the model in the face of currently discussed crime factors. Several new features are added to the existing literature:
Evidence from panel data of the German Laender (states) and Kreise (counties) allows us to explore the different experiences in highly and sparsely populated areas. Moreover, it enables us to look at differences between East and West Germany. Since unemployment can aggravate the probability of being in a young group with "dangerous" social interactions, we estimate the impact of being young and unemployed. Demographic factors like urbanisation and population density effects are taken into account. Moreover, we are trying to shed some light on the validity of the popular argument that the number of foreigners is responsible for growing German crime rates. We add a new relative income variable that might explain crime due to a lack of legal income opportunities ("envy" effects). The impact of unemployment is divided into the investigation of overall unemployment and youth unemployment effects. The analyses break up aggregate crime into 8 crime categories. Thus, we are in the position to separate property crime, which might be more directly related to the rational offender, and crime against the person.
Our results confirm the deterrence hypothesis for crime against property (i.e. higher clear-up rates reduce crime against property), but only weak support can be observed for crime against the person. Economic variables that are used to measure legal and illegal income opportunities perform well in estimations for crime against property. Absolute income turns out to be a measure of illegal rather than legal income opportunities (i.e. higher income is associated with higher crime rates). Results based on relative income show that a widening income gap with respect to richer regions increases the probability of delinquent behaviour. Thus, growing inequality seems to be an important factor of crime. Demographic factors reveal important and significant influences. As usually found in the literature, we observe higher crime rates in highly urbanised areas. Moreover, we confirm the ambiguous result for general unemployment. However, being young and unemployed increases the probability of committing crimes. Additionally, also simply being young aggravates the danger of getting into the bad company of a group with harmful social interactions. Interpreting the influence of the aggregate share of foreigners is difficult in aggregate studies and can only be tentative. Our results suggest that the share of foreigners in Germany is positively associated with crime rates. As regards crime in the eastern and western part of Germany, there remains a higher crime rate in the east, even after controlling for differences in legal and illegal income opportunities and other factors of crime. The reason for this is not clear. Possibly, prosecution of crime and administration of justice are still organised inefficiently in eastern Germany. An other explanation might be that the newly gained freedom has led to (temporarily?) higher violation of social norms. However, a reasonable explanation of the east-west crime differential would need further research.