Economics and Crime in the States
Economic Review, Vol. 84, No. 1, 1999
Polls identify crime as the number one public worry. Crime also exacts tremendous costs not factored into official measures of well-being, and it is a favorite subject of political campaign promises. However, the public seems largely unaware that crime responds to economic conditions and incentives and that the results of a substantial body of work by economists have important implications for public policy.
This article introduces the economics and crime literature by describing a simple supply-and-demand crime model in which criminals supply crime, the public demands protection from crime, and the government provides public protection. The author uses the model to show how crime responds to a variety of demographic and economic factors and also what results to expect from public policy proposals.
Using state data from 1971 to 1994, the article outlines broad regional differences and trends in the patterns of crime in the United States. While the nation in the 1990s has seen crime fall dramatically in almost all categories, not all regions have benefited equally. In particular, southeastern states have seen distinct worsening in crime rates relative to other regions.
The author subjects the data to a more in-depth treatment using a panel regression approach that estimates the effects of demographic and economic variables on crime. The results mirror some found by others but also highlight serious issues vexing the empirical literature. Generally, the demographic and economic variables explain crime rather well, and estimates for the most part conform to the economic model of crime.