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Does Unemployment Increase Crime?: Evidence from U.S. Data 1974–2000

  • Ming-Jen Lin

OLS may understate the effect of unemployment on crime because of the endogeneity problem (Raphael and Winter-Ember 2001). In this paper, we use changes in the real exchange rate, state manufacturing sector percentages, and state union membership rates as novel instrumental variables to carry out 2SLS estimations. We find a one-percentage-point increase in unemployment would increase property crime by 1.8 percent under the OLS method, but that the elasticity goes up to 4 percent under 2SLS. The larger 2SLS effect has significant policy implications because it explains 30 percent of the property crime change during the 1990s.

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Article provided by University of Wisconsin Press in its journal Journal of Human Resources.

Volume (Year): 43 (2008)
Issue (Month): 2 ()
Pages: 413-436

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Handle: RePEc:uwp:jhriss:v:43:y:2008:i:2:p:413-436
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  1. Simon Burgess & Michael M. Knetter, 1996. "An International Comparison of Employment Adjustment to Exchange Rate Fluctuations," NBER Working Papers 5861, National Bureau of Economic Research, Inc.
  2. Joshua Angrist & Alan B. Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," NBER Working Papers 8456, National Bureau of Economic Research, Inc.
  3. Entorf, Horst & Spengler, Hannes, 2000. "Socioeconomic and demographic factors of crime in Germany: Evidence from panel data of the German states," International Review of Law and Economics, Elsevier, vol. 20(1), pages 75-106, March.
  4. Steven D. Levitt, 1995. "The Effect of Prison Population Size on Crime Rates: Evidence From Prison Overcrowding Litigation," NBER Working Papers 5119, National Bureau of Economic Research, Inc.
  5. Roland G. Fryer & Paul S. Heaton & Steven D. Levitt & Kevin M. Murphy, 2005. "Measuring the Impact of Crack Cocaine," NBER Working Papers 11318, National Bureau of Economic Research, Inc.
  6. Jeff Grogger & Michael Willis, 2000. "The Emergence Of Crack Cocaine And The Rise In Urban Crime Rates," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 519-529, November.
  7. Ming-Jen Lin, 2008. "Does Unemployment Increase Crime?: Evidence from U.S. Data 1974–2000," Journal of Human Resources, University of Wisconsin Press, vol. 43(2), pages 413-436.
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