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Economic Conditions and Crime

Economic Conditions and Crime. Unemployment and Crime A 1 percentage point increase in the unemployment rate (e.g. from 7% to 8%)increases Property Crime by 2.2%. A 2% increase in wages of low-skilled workers decreases crime by 1%.The same is true for the real (inflation adjusted) minimum w

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Economic Conditions and Crime

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    1. Economic Conditions and Crime Naci Mocan Department of Economics Louisiana State University and National Bureau of Economic Research

    2. Economic Conditions and Crime Unemployment and Crime A 1 percentage point increase in the unemployment rate (e.g. from 7% to 8%) increases Property Crime by 2.2%. A 2% increase in wages of low-skilled workers decreases crime by 1%. The same is true for the real (inflation adjusted) minimum wage

    3. Economic Conditions and Crime A typical business cycle in the U.S. Average contraction (recession) is 10 months, but average expansion (recovery) takes 52 months A 1 ppt. increase in the unemployment rate takes 7 months; BUT a 1 ppt. decline in the unemployment rate takes 17 months.

    4. Asymmetry New research shows that Crime is impacted MORE from a RISE in unemployment than from a DECLINE in unemployment. (The impact of unemployment on crime is asymmetric).

    5. Sharp Rise-Gradual Decline

    6. NEW RESEARCH shows that Economic uncertainty (about the future) has an impact on crime Social interactions and peer effects have an impact on crime

    7. Deterrence We also know that deterrence has a robust impact on crime If the arrest rate of an index crime goes up by 10%, the corresponding crime rate goes down by 2-6%. If the number of uniformed police officers goes up by 10%, some property crimes go down by 6-7%. BUT POLICE DEPT BUDGETS GET IMPACTED DURING A RECESSIONBUT POLICE DEPT BUDGETS GET IMPACTED DURING A RECESSION

    8. Broken Windows Broken Windows Policing Works In NYC- Mayor Giuliani and Commissioner Bratton’s implementation of broken-windows policing: Increase in misdemeanor arrests (disorderly conduct, public drunkenness, vandalism, etc.) A 10% increase in misdemeanor arrests reduce MV thefts by 2%, robberies by 3%, grand larcenies by 0.5%.

    9. Why crime rates differ between states or cities • Economic conditions differ In 2005, Male UR with Education<12 yrs. Average of all states: 13% AL: 5%, GA:7%, PA: 9%, OH:11%, MN:13% MS: 16% IN: 18%, SD:24%, ND:29%, MT:34%

    10. Louisiana in 2005 Overall Unemployment Rate in East Carroll Parish: 12.4% West Carroll Parish: 10.2% East Feliciana Parish: 6.4% West Feliciana Parish: 7.6%

    11. • Demographic composition differs (% young, % poor, % educated, % single parent, gun ownership rates, drug use, etc.) • Police resources and enforcement differ

    12. Why criminal activity differs between neighborhoods within the same city Same reasons as before Plus • Social Multiplier (spillovers, peer effects)

    13. If my criminal activity influences my peer’s criminal proclivity, aggregate crime will exhibit differential spatial persistence depending on the intensity of local social interactions Social networks (stronger in segregated neighborhoods)

    14. Do We Know Enough? We don’t know everything We don’t know a lot We know a lot to implement good policy (police force, arrests, unemployment, wages) More research with better data will provide additional insights

    15. Crime is an individual behavior Should we analyze data on individuals or aggregates (crime rates)? Both are important Need better (focused, integated) data.

    16. Real World Experiments can be designed with data collection criminal activity, risk aversion, peer interactions, contextual variables Merge them with labor market, police and school data Precedent exists (Add Health data) UR needs to be measured MORE finely.

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