Crime and Unemployment Insurance in the Great Recession
45 Pages Posted: 17 May 2017
Date Written: April 23, 2017
Crime fell sharply in the United States during the Great Recession, at a time of deep economic decline. This was a puzzle: crime is expected to rise, not fall, when unemployment rises. Using a novel identification strategy, I show that unemployment insurance (UI) benefit extensions can account for part of the puzzle, explaining why crime did not rise. The higher propensity to commit crime associated with higher joblessness was mitigated by the fact that UI was more generous, replacing a larger portion of pre-unemployment income for a longer time. I use exogenous variation provided by different state-level UI extension rules in the length of benefits to identify the impact of unemployment benefits on crime. I estimate that in places with an additional $1,000 rise in UI per unemployed person crime would have been 1.5% higher were it not for the extensions. UI extensions can account up to half of the reason why crime did not rise.
Keywords: Crime; Unemployment Insurance; Great Recession
JEL Classification: K42, H00, J65
Suggested Citation: Suggested Citation