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Is there a Natural Rate of Crime?

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Author Info
Paresh Kumar Narayan
Ingrid Nielsen
Russell Smyth

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Abstract

Studies in the economics of crime literature have reached mixed conclusions on the deterrence hypothesis. One explanation which has been offered for the failure to find evidence of a deterrent effect in the long run is the natural rate of crime. This paper applies the univariate Lagrange Multiplier (LM) unit root test with one and two structural breaks to crime series for the United Kingdom and United States and the panel LM unit root test with and without a structural break to crime rates for a panel of G7 countries to examine whether there is a natural rate of crime. Our main finding is that when we allow for two structural breaks in the LM unit root test and a structural break in the panel data unit root test, there is strong evidence of a natural rate of crime. The policy implications of our findings is that governments should focus on altering the economic and social structural profile which determines crime in the long run rather than increasing expenditure on law enforcement which will at best reduce crime rates in the short run.

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Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 18/05.

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Length: 28 pages
Date of creation: 02 Oct 2005
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Handle: RePEc:mos:moswps:2005-18

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Related research
Keywords: Natural rate of crime; Deterrence hypothesis; unit root.;

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Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
K14 - Law and Economics - - Basic Areas of Law - - - Criminal Law

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