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Crime Heterogeneity and Welfare Spending Theory and Empirical Evidence based on the Universal Credit System

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  • King Yoong Lim
  • Reagan Pickering

Abstract

We examine the effects of welfare spending on crime, using the universal credit (UC) system in England and Wales as a case study. Motivated by a seemingly positive crime-UC nexus, we develop a novel theoretical model of crime and cash transfer that distinguishes between introductory and level effect, as well as a crime-specific human capital-induced heterogeneity between criminal activities. Based on county-level data for 10 crime types, we use both standard fixed-effect estimator and different instrumental variable-estimation strategies (to account for endogeneity of the UC rate) to evaluate the theoretical propositions. Criminal damage and arson are found to exhibit the characteristics of being criminal human capital-dependent. In contrast, as a poliy tool to combat crime, welfare spending appears to be most effective in reducing public disorder and weapon possessions. Overall, we find the claim that UC policy has led to an increase in crime rate to be overstated.

Suggested Citation

  • King Yoong Lim & Reagan Pickering, 2020. "Crime Heterogeneity and Welfare Spending Theory and Empirical Evidence based on the Universal Credit System," NBS Discussion Papers in Economics 2020/04, Economics, Nottingham Business School, Nottingham Trent University.
    • Handle: RePEc:nbs:wpaper:2020/04
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    More about this item

    Keywords

    Crime Heterogeneity; England and Wales; Universal Credit; Welfare Spending;
    All these keywords.

    JEL classification:

    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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