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Crime, different taxation, police spending and embodied human capital

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  • Pengfei Jia
  • King Yoong Lim
  • Ali Raza

Abstract

We develop a model with crime, embodied human capital, police spending and three different taxation. Based on propositions examined analytically, numerically and empirically using a cross‐country panel data on crime, we contribute to the literature by identifying a positive crime‐labor income tax nexus and a negative crime‐capital income tax nexus. The opposite effect between labor and capital income taxation on crime is novel in the literature. We also document positive association between crime and consumption tax, which suggests that apprehension probability (a proxy for the effectiveness of criminal justice system) is endogenous to fiscal mechanism. These findings have potential policy implications in that, there is a potential role for dedicated tax instruments to be used in supporting conventional crime prevention and deterrence policies.

Suggested Citation

  • Pengfei Jia & King Yoong Lim & Ali Raza, 2020. "Crime, different taxation, police spending and embodied human capital," Manchester School, University of Manchester, vol. 88(5), pages 664-698, September.
    • Handle: RePEc:bla:manchs:v:88:y:2020:i:5:p:664-698
    DOI: 10.1111/manc.12317
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    More about this item

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H59 - Public Economics - - National Government Expenditures and Related Policies - - - Other
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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