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Crime and Economic Incentives

  • Stephen Machin
  • Costas Meghir

We explore the role that economic incentives, particularly changes in wages at the bottom end of the wage distribution, play in determining crime rates. We use data on the police force areas of England and Wales between 1975 and 1996 and find (relative) falls in the wages of low-wage workers lead to increases in crime. We carry out a number of experiments with different wage measures, including a wage measure that accounts for the effects of changes in the composition of employment. These reinforce the picture of a strong association between the low-wage labor market and crime. The result that incentives play a central role is reinforced further by the strong impact on crime of deterrence measures and of a measure of the returns to crime.

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File URL: http://jhr.uwpress.org/cgi/reprint/XXXIX/4/958
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Article provided by University of Wisconsin Press in its journal Journal of Human Resources.

Volume (Year): 39 (2004)
Issue (Month): 4 ()
Pages:

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Handle: RePEc:uwp:jhriss:v:39:y:2004:i:4:p958-979
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  1. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
  2. Meghir, Costas & Whitehouse, Edward, 1996. "The Evolution of Wages in the United Kingdom: Evidence from Micro Data," Journal of Labor Economics, University of Chicago Press, vol. 14(1), pages 1-25, January.
  3. Edward L. Glaeser & Bruce Sacerdote, 1996. "Why is There More Crime in Cities?," Harvard Institute of Economic Research Working Papers 1746, Harvard - Institute of Economic Research.
  4. Richard Blundell & Amanda Gosling & Hidehiko Ichimura & Costas Meghir, 2006. "Changes in the Distribution of Male and Female Wages Accounting for Employment Composition Using Bounds," CIRJE F-Series CIRJE-F-420, CIRJE, Faculty of Economics, University of Tokyo.
  5. Freeman, Richard B., 1999. "The economics of crime," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 52, pages 3529-3571 Elsevier.
  6. Jeff Grogger, 1997. "Market Wages and Youth Crime," NBER Working Papers 5983, National Bureau of Economic Research, Inc.
  7. Amanda Gosling & Stephen Machin & Costas Meghir, 1994. "The changing distribution of male wages in the UK," IFS Working Papers W94/13, Institute for Fiscal Studies.
  8. Edward L. Glaeser & Bruce Sacerdote & Jose A. Scheinkman, 1995. "Crime and Social Interactions," NBER Working Papers 5026, National Bureau of Economic Research, Inc.
  9. Reilly, Barry & Witt, Robert, 1996. "Crime, Deterrence and Unemployment in England and Wales: An Empirical Analysis," Bulletin of Economic Research, Wiley Blackwell, vol. 48(2), pages 137-59, April.
  10. John Y. Campbell & John H. Cochrane, 1995. "By Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior," NBER Working Papers 4995, National Bureau of Economic Research, Inc.
  11. 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.
  12. Robert Witt & Alan Clarke & Nigel Fielding, 1998. "Crime, earnings inequality and unemployment in England and Wales," Applied Economics Letters, Taylor & Francis Journals, vol. 5(4), pages 265-267.
  13. 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.
  14. Steven D. Levitt, 1997. "Juvenile Crime and Punishment," NBER Working Papers 6191, National Bureau of Economic Research, Inc.
  15. Richard B. Freeman, 1996. "Why Do So Many Young American Men Commit Crimes and What Might We Do About It?," NBER Working Papers 5451, National Bureau of Economic Research, Inc.
  16. Manski, C.F., 1990. "The Selection Problem," Working papers 90-12, Wisconsin Madison - Social Systems.
  17. Richard Blundell & Howard Reed & Thomas Stoker, 1999. "Interpreting aggregate wage growth," IFS Working Papers W99/13, Institute for Fiscal Studies.
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