Crime, Inequality, and Unemployment

38 Pages Posted: 4 Nov 2002

See all articles by Ken Burdett

Ken Burdett

University of Pennsylvania - Department of Economics

Ricardo Lagos

New York University (NYU) - Department of Economics

Randall Wright

University of Wisconsin - Madison - Department of Finance, Investment and Banking; Federal Reserve Banks - Federal Reserve Bank of Minneapolis

Date Written: May 3, 2002

Abstract

There has been much discussion of the relationships between crime, inequality and unemployment. We construct a model where all three are endogenous. Introducing crime into otherwise standard models affects the labor market in several interesting ways. For example, we show how the crime rate affects the unemployment rate and vice-versa; how the possibility of criminal activity can lead to wage inequality among homogeneous workers; and how the possibility of crime can generate multiple equilibria in natural but previously unexplored ways. In particular, two fundamentally identical neighborhoods may easily end up with different levels of unemployment, inequality, and crime. The model can be used to study the equilibrium effects of anti-crime policies, such as changes in apprehension rates or jail sentences, as well as more traditional labor market policies such as unemployment insurance.

Suggested Citation

Burdett, Ken and Lagos, Ricardo and Wright, Randall D., Crime, Inequality, and Unemployment (May 3, 2002). PIER Working Paper No. 02-038. Available at SSRN: https://ssrn.com/abstract=339160 or http://dx.doi.org/10.2139/ssrn.339160

Ken Burdett

University of Pennsylvania - Department of Economics ( email )

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Ricardo Lagos

New York University (NYU) - Department of Economics ( email )

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New York, NY 10011
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212-998-8937 (Phone)

Randall D. Wright (Contact Author)

University of Wisconsin - Madison - Department of Finance, Investment and Banking ( email )

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Madison, WI 53706
United States
608-263-3860 (Phone)

Federal Reserve Banks - Federal Reserve Bank of Minneapolis

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Minneapolis, MN 55480
United States

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