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Crime and economic incentives

  • Steve Machin
  • Costas Meghir

    (Institute for Fiscal Studies and Yale University)

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. We find that falls in the wages of unskilled workers leads 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 impact of wages on 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://www.ifs.org.uk/wps/wp0017.pdf
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Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W00/17.

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Length: 33 pp
Date of creation: Sep 2000
Date of revision:
Handle: RePEc:ifs:ifsewp:00/17
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  1. Blundell, Richard & Gosling, Amanda & Ichimura, Hidehiko & Meghir, Costas, 2004. "Changes in the Distribution of Male and Female Wages Accounting for Employment Composition Using Bounds," IZA Discussion Papers 1350, Institute for the Study of Labor (IZA).
  2. Gosling, Amanda & Machin, Stephen & Meghir, Costas, 2000. "The Changing Distribution of Male Wages in the U.K," Review of Economic Studies, Wiley Blackwell, vol. 67(4), pages 635-66, October.
  3. Manski, C.F., 1990. "The Selection Problem," Working papers 90-12, Wisconsin Madison - Social Systems.
  4. Steven D. Levitt, 1998. "Juvenile Crime and Punishment," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1156-1185, December.
  5. 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.
  6. Jeff Grogger, 1997. "Market Wages and Youth Crime," NBER Working Papers 5983, National Bureau of Economic Research, Inc.
  7. Levitt, Steven D, 1998. "Why Do Increased Arrest Rates Appear to Reduce Crime: Deterrence, Incapacitation, or Measurement Error?," Economic Inquiry, Western Economic Association International, vol. 36(3), pages 353-72, July.
  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. Richard Blundell & Howard Reed & Thomas Stoker, 1999. "Interpreting aggregate wage growth," IFS Working Papers W99/13, Institute for Fiscal Studies.
  10. Reilly, Barry & Robert Witt, 1992. "Crime, deterrence and unemployment in England and Wales: an empirical analysis," Discussion Papers in Economics 12/92, Department of Economics, University of Sussex.
  11. Edward L. Glaeser & Bruce Sacerdote, 1999. "Why Is There More Crime in Cities?," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages S225-S258, December.
  12. Richard Blundell & Howard Reed & Thomas M. Stoker, 2003. "Interpreting Aggregate Wage Growth: The Role of Labor Market Participation," American Economic Review, American Economic Association, vol. 93(4), pages 1114-1131, September.
  13. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169.
  14. Richard B. Freeman, 1996. "Why Do So Many Young American Men Commit Crimes and What Might We Do about It?," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 25-42, Winter.
  15. 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.
  16. Heckman, James J & Sedlacek, Guilherme, 1985. "Heterogeneity, Aggregation, and Market Wage Functions: An Empirical Model of Self-selection in the Labor Market," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1077-1125, December.
  17. 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.
  18. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
  19. Eric D. Gould & Bruce A. Weinberg & David B. Mustard, 2002. "Crime Rates And Local Labor Market Opportunities In The United States: 1979-1997," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 45-61, February.
  20. 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.
  21. 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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