Crime, inequality and unemployment in England and Wales

Abstract

A model of crime is developed based on principles from the existing literature with some original insight. The implications of the model are that income inequality and unemployment are important explanatory variables for crimes motivated by economic gain, but do not offer much explanatory power for other types of crime. Panel data of UK regions over the years from 2002 to 2007 are then used to test these predictions. The empirical results strongly support the hypothesis that crime is an economic phenomenon.

Keywords:

• crime
• income inequality
• unemployment
• panel data
• UK

JEL Classification:

• D63
• J39
• K42

Notes

¹ Pew Global Attitudes survey, available at http://pewglobal.org/

² Calculated from HM Treasury data.

³ The connection between crime and economics is as old as economics itself. Smith (1937), in the Wealth of Nations noted that: ‘The affluence of the rich excites the indignation of the poor, who are often both driven by want, and prompted by envy; to invade his possessions … can be protected only by the powerful arm of the civil magistrate.’

⁴ Reducing re-offending by ex-prisoners (2002) Report by the Social Exclusion Unit (SEU).

⁵ To the best of our knowledge, this has not been attempted.

⁶ Models where work and crime are combined exists; see Witte and Tauchen (1994) for example. For the purposes of showing the determinants of crime, a simple static model is sufficient.

⁷ In reality, a third state exists where the criminal is caught but not convicted due for example to a lack of evidence. For simplicity but without loss of generality, it is assumed that if a criminal is caught, he is convicted.

⁸ Note that is an indirect utility function.

⁹ This is not published but is available on request.

¹⁰ London was excluded due to the low resident population which artificially inflates the crime rate per thousand populations (Machin and Meghir, 2004). Also, it is much smaller than the other regions (Reilly and Witt, 1996; Witt et al., 1998).

¹¹ Available on the ONS website.

¹² Witt et al. (1998) used weekly.

¹³ See Witt et al. (1998).

¹⁴ The UK is surprisingly homogenous in this respect.