An On-the-Job Search Model of Crime, Inequality, and Unemployment

26 Pages Posted: 28 Aug 2004

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

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Abstract

We extend simple search models of crime, unemployment, and inequality to incorporate on-the-job search. This is valuable because, although simple models are useful, on-the-job search models are more interesting theoretically and more relevant empirically. We characterize the wage distribution, unemployment rate, and crime rate theoretically, and use quantitative methods to illustrate key results. For example, we find that increasing the unemployment insurance replacement rate from 53 to 65 percent increases unemployment and crime rates from 10 and 2.7 percent to 14 and 5.2 percent. We show multiple equilibria arise for some fairly reasonable parameters; in one case, unemployment can be 6 or 23 percent, and crime 0 or 10 percent, depending on the equilibrium.

Suggested Citation

Burdett, Ken and Lagos, Ricardo and Wright, Randall D., An On-the-Job Search Model of Crime, Inequality, and Unemployment. International Economic Review, Vol. 45, No. 3, pp. 681-706, August 2004. Available at SSRN: https://ssrn.com/abstract=572921

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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Randall D. Wright (Contact Author)

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

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Madison, WI 53706
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Federal Reserve Banks - Federal Reserve Bank of Minneapolis

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