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Inequality and Crime: Separating the Effects of Permanent and Transitory Income

Earlier studies on income inequality and crime have typically used total income or total earnings. However, it is quite likely that it is changes in permanent rather than in transitory income that affects crime rates. The purpose of this paper is therefore to disentangle the two effects by, first, estimating region-specific inequality in permanent and transitory income and, second, estimating crime equations with the two separate income components as explanatory variables. The results indicate that it is important to separate the two effects; while an increase in the inequality in permanent income yields a positive and significant effect on total crimes and three different property crimes, an increase in the inequality in transitory income has no significant effect on any type of crime. Using a traditional, aggregate, measure of income yields mainly insignificant effects on crime.

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Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2005:20.

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Length: 27 pages
Date of creation: 27 Jun 2005
Date of revision:
Publication status: Forthcoming in Oxford Bulletin of Economics and Statistics.
Handle: RePEc:hhs:uunewp:2005_020
Contact details of provider: Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Web page: http://www.nek.uu.se/Email:


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  1. Robert A. Moffitt & Peter Gottschalk, 2002. "Trends in the Transitory Variance of Earnings in the United States," Economic Journal, Royal Economic Society, vol. 112(478), pages C68-C73, March.
  2. Lorenzo Cappellari, 2004. "The Dynamics and Inequality of Italian Men’s Earnings: Long-term Changes or Transitory Fluctuations?," Journal of Human Resources, University of Wisconsin Press, vol. 39(2).
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  6. 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.
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  8. Nilsson, Anna & Agell, Jonas, 2003. "Crime, Unemployment and Labor Market Programs in Turbulent Times," Research Papers in Economics 2003:13, Stockholm University, Department of Economics.
  9. Baker, Michael, 1997. "Growth-Rate Heterogeneity and the Covariance Structure of Life-Cycle Earnings," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 338-75, April.
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  13. Edward E. Leamer, 1982. "Let's Take the Con Out of Econometrics," UCLA Economics Working Papers 239, UCLA Department of Economics.
  14. Donohue, John J. & Levitt, Steven D., 2000. "The Impact of Legalized Abortion on Crime," Berkeley Olin Program in Law & Economics, Working Paper Series qt00p599hk, Berkeley Olin Program in Law & Economics.
  15. Edmark, Karin, 2003. "The Effects of Unemployment on Property Crime: Evidence from a Period of Unusually Large Swings in the Business Cycle," Working Paper Series 2003:14, Uppsala University, Department of Economics.
  16. Lorenzo Cappellari, 2002. "The dynamics and inequality of Italian male earnings: permanent changes or transitory fluctuations?," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 C2-2, International Conferences on Panel Data.
  17. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 249-275, February.
  18. 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.
  19. F. Bourguignon, 1999. "Crime as a Social Cost of Poverty and Inequality: A Review Focusing on Developing Countries," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE.
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  23. Milton Friedman & Simon Kuznets, 1954. "Income from Independent Professional Practice," NBER Books, National Bureau of Economic Research, Inc, number frie54-1.
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