Crime Rates and Local Labor Market Opportunities In the United States: 1979-1997

Abstract

The relationship between crime and labor market conditions is typically studied by looking at the unemployment rate. In contrast, this paper argues that wages are a better measure of labor market conditions than the unemployment rate. As the wages of those most likely to commit crime (unskilled men) have been falling in the past few decades, we examine the impact of this trend on the crime rate giving special attention to issues of endogeneity. Wages are found to be a significant determinant of crime and more important than the unemployment rate. As theory would predict, economic factors are more important for property crime than violent crime. These results are robust to various measures of wages, two regression strategies, the inclusion of deterrence variables, and controls for simultaneity.

JEL Classification: J2, K42