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Crime, Job Searches, and Economic Growth

  • Juin-jen Chang
  • Chi-Hsin Wu

    ()

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    This paper constructs a theoretical model with which to analyze the puzzling links between unemployment and crime rates, described in the literature. Most theoretical papers on crime, such as Becker Journal of Political Economy 76, 169–217, ( 1968 ), Ehrlich Journal of Political Economy 81, 521–565, ( 1973 ), and İmrohoroğlu et al. International Economic Review 41, 1–25, ( 2000 ), emphasize the analysis of the equilibrium crime rate, dealing with the unemployment rate as an exogenous parameter, but little attention has been devoted to investigating the influence of the criminal market on the equilibrium unemployment rate in the labor market and how these markets interact. This paper illustrates how the causes of crime play a crucial role in the unemployment-crime relationship, wherein different causality result in different associative relationships between unemployment and crime. The aforementioned conclusion illustrates the theory explaining why the empirical findings related to the unemployment-crime relationship are mixed and equivocal. Second, this paper describes the diverse origins of crime, in which employed workers and unemployed workers have different incentives for entering a life of crime. Employed and unemployed workers assume different opportunity costs by engaging in criminal activities, resulting in different effects on the economy. This explains why crime rates relative to unemployment rates in different countries could be either procyclical or countercyclical. Copyright International Atlantic Economic Society 2012

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    Article provided by International Atlantic Economic Society in its journal Atlantic Economic Journal.

    Volume (Year): 40 (2012)
    Issue (Month): 1 (March)
    Pages: 3-19

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    Handle: RePEc:kap:atlecj:v:40:y:2012:i:1:p:3-19
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    1. Mulligan, Casey B & Sala-i-Martin, Xavier, 1993. "Transitional Dynamics in Two-Sector Models of Endogenous Growth," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 739-73, August.
    2. Isaac Ehrlich, 1996. "Crime, Punishment, and the Market for Offenses," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 43-67, Winter.
    3. Palokangas, Tapio, 1996. "Endogenous growth and collective bargaining," Journal of Economic Dynamics and Control, Elsevier, vol. 20(5), pages 925-944, May.
    4. Aghion, Philippe & Howitt, Peter, 1991. "Growth and Unemployment," CEPR Discussion Papers 577, C.E.P.R. Discussion Papers.
    5. Ayse Imrohoroglu & Antonio Merlo & Peter Rupert, 1996. "On the political economy of income redistribution and crime," Working Paper 9609, Federal Reserve Bank of Cleveland.
    6. Jess Benhabib & Roger E.A. Farmer, 1992. "Indeterminacy and Increasing Returns," UCLA Economics Working Papers 646, UCLA Department of Economics.
    7. Robert J. Barro, 1995. "Inflation and Economic Growth," NBER Working Papers 5326, National Bureau of Economic Research, Inc.
    8. Ehrlich, Isaac, 1973. "Participation in Illegitimate Activities: A Theoretical and Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 521-65, May-June.
    9. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 1-76.
    10. C Bean & Christopher A. Pissarides, 1992. "Unemployment, Consumption and Growth," CEP Discussion Papers dp0100, Centre for Economic Performance, LSE.
    11. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169.
    12. Wu, Yangru & Zhang, Junxi, 1998. "Endogenous growth and the welfare costs of inflation: a reconsideration," Journal of Economic Dynamics and Control, Elsevier, vol. 22(3), pages 465-482, March.
    13. Kenneth Burdett & Ricardo Lagos & Randall Wright, 2004. "An On-The-Job Search Model Of Crime, Inequality, And Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(3), pages 681-706, 08.
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