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

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Abstract

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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  • Dahlberg, Matz & Gustavsson, Magnus, 2005. "Inequality and Crime: Separating the Effects of Permanent and Transitory Income," Working Paper Series 2005:20, Uppsala University, Department of Economics.
    • Handle: RePEc:hhs:uunewp:2005_020
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    1. Matz Dahlberg & Magnus Gustavsson, 2008. "Inequality and Crime: Separating the Effects of Permanent and Transitory Income," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 70(2), pages 129-153, April.
    2. M. B. Gordon & J. R. Iglesias & V. Semeshenko & J. P. Nadal, 2009. "Crime and punishment: the economic burden of impunity," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 68(1), pages 133-144, March.
    3. Scott Drewianka, 2010. "Cross-Sectional Variation In Individuals' Earnings Instability," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(2), pages 291-326, June.
    4. Ahad, Muhammad, 2016. "Nexus Between Income Inequality, Crime, Inflation and Poverty: New Evidence from Structural Breaks for Pakistan," MPRA Paper 72429, University Library of Munich, Germany, revised 2016.
    5. Gustavsson, Magnus, 2013. "Permanent versus transitory wage differentials and the inequality-hours hypothesis," Economics Letters, Elsevier, vol. 121(3), pages 537-541.
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    More about this item

    Keywords

    Crime; Earnings dynamics; Inequality;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J39 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Other
    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General

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