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Crime and Inflation: Preliminary Cross-National Evidence

Crime and Inflation: Preliminary Cross-National Evidence. Richard Rosenfeld University of Missouri – St. Louis USA. Inflation is the cruelest tax. Anon. New Consensus?. Recent US research reveals robust effects of changing economic conditions on crime rates

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Crime and Inflation: Preliminary Cross-National Evidence

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  1. Crime and Inflation: Preliminary Cross-National Evidence Richard Rosenfeld University of Missouri – St. Louis USA

  2. Inflation is the cruelest tax.Anon

  3. New Consensus? • Recent US research reveals robust effects of changing economic conditions on crime rates • Beyond the unemployment rate: GDP, wages, consumer sentiment • Direct effects limited to property crime; indirect effects on violent crime

  4. Great Recession • Unemployment rose, economic growth stalled, consumer sentiment plunged during 2008-09 recession • Crime rates fell • Resurgence of the “consensus of doubt”

  5. Was the Great Recession Different? • Unlike in previous recessions, inflation rates at historic lows • Prices dropped in 2009 for first time in over 50 years • Anecdotal evidence of inflation – crime connection • 1930s: price deflation • 1950s: low inflation • 1960s: rising inflation • 1970s: stagflation Falling crime rates Rising crime rates

  6. Prior Research • Scattered US studies of inflation effects on crime • All show significant positive effect • Little theoretical development • No cross-national research

  7. Inflation vs. Other Indicators of Economic Adversity • More widespread • More immediate • Closer relationship to demand for stolen goods

  8. Logic Model: Inflation and the Market for Stolen Goods • Supply • Offenders sell or trade goods they do not consume or give away • Offenders respond to incentives, including demand for stolen goods • Demand • Consumers “trade down” as prices rise • Stolen goods are “inferior goods”: demand increases as prices rise (or aggregate income falls) • Acquisitive crime rises with increases in demand for stolen goods

  9. Inflation and Violent Crime • Trafficking stolen goods risky business • Underground markets “stateless” locations • Violence potent enforcement mechanism

  10. Research Issues • Are year-over-year changes in crime related to inflation? • Is the relationship between crime and inflation nonlinear? • Do former communist nations affect the relationship between inflation and crime? • Are the effects of inflation on crime independent of those of GDP and unemployment? • Does inflation condition the effect of unemployment on crime?

  11. Data and Methods • DVs: Homicide, Robbery, and Burglary Rates for 20 Nations, 1990 – 2010 • European Sourcebook of Crime and Criminal Justice Statistics • Eurostat (2008-10) • IVs: Inflation, unemployment, GDP per cap, nation and period effects • World Bank • International Monetary Fund • Fixed effects panel models with panel corrected standard errors • Variables first-differenced, except where noted

  12. Sample Austria Bulgaria Denmark England & Wales Estonia Finland France Germany Greece Hungary Ireland Italy Netherlands Northern Ireland Norway Poland Scotland Sweden Switzerland United States

  13. Summary Descriptive and Bivariate Results

  14. Crime as a Non-Linear Function of InflationBurglary Example

  15. Multivariate Results by Crime Type

  16. Discussion • Crime is a nonlinear function of inflation • Inflation effects are small but robust • Inflation conditions the effect of unemployment on homicide and robbery, but not burglary • Economic growth has sizable and robust effects on crime • Positive effect of growth on homicide needs further exploration

  17. Next Steps • Add other economic indicators • Consumer sentiment • Poverty, inequality • Add other controls • Age composition • Divorce rate • Urbanization

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