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Unobserved heterogeneity bias when estimating the economic model of crime

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  • Todd Cherry

Abstract

Using unique and unpublished panel data from selected US cities, the paper investigates the consequences of ignoring unobserved heterogeneity in the unit of observation when estimating the economic model of crime. Results confirm that neglecting to control for unobserved heterogeneity overstates the ability of sanctions to deter criminal activity. Further, this upward bias is found to vary significantly across crime types. Interestingly, heterogeneity is insignificant in the tightly reported crimes of murder and auto-theft while being significant in assault, robbery, burglary and larceny where individuals and police have greater discretion in reporting.

Suggested Citation

  • Todd Cherry, 1999. "Unobserved heterogeneity bias when estimating the economic model of crime," Applied Economics Letters, Taylor & Francis Journals, vol. 6(11), pages 753-757.
    • Handle: RePEc:taf:apeclt:v:6:y:1999:i:11:p:753-757
    DOI: 10.1080/135048599352349
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    1. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 1-54, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Worrall, John L., 2004. "The effect of three-strikes legislation on serious crime in California," Journal of Criminal Justice, Elsevier, vol. 32(4), pages 283-296.
    2. Worrall, John L. & Schram, Pamela & Hays, Eric & Newman, Matthew, 2004. "An analysis of the relationship between probation caseloads and property crime rates in California counties," Journal of Criminal Justice, Elsevier, vol. 32(3), pages 231-241.
    3. Todd Cherry, 2001. "Financial penalties as an alternative criminal sanction: Evidence from panel data," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 29(4), pages 450-458, December.
    4. Lau, Evan & Hamzah, Siti Nur Zahara & Habibullah, Muzafar, 2019. "The Economic of Deterrence: A Wrong Policy or A Misplaced Strategy?," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 53(1), pages 105-119.
    5. John L. Worrall, 2004. "Funding Collaborative Juvenile Crime Prevention Programs," Evaluation Review, , vol. 28(6), pages 471-501, December.

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