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Crime and Punishment Revisited

  • Kelaher, Richard
  • Sarafidis, Vasilis

Despite an abundance of empirical evidence on crime spanning over forty years, there exists no consensus on the impact of the criminal justice system on crime activity. We argue that this may be due to the combined effect of simultaneity, omitted variable bias and aggregation bias that may confound many of these studies. We construct a new panel data set of local government areas in Australia and develop a testing framework for the implications of economic theory on crime behaviour. The empirical results suggest that the criminal justice system can potentially exert a much greater influence on crime activity than is the common view in the literature. In addition, we find that increasing the risk of apprehension and conviction is more influential in reducing crime than raising the expected severity of punishment. Violent crime is more persistent and relatively less responsive to law enforcement policies compared to non-violent crime.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 28213.

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Date of creation: 11 Jan 2011
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Handle: RePEc:pra:mprapa:28213
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  16. Carr-Hill, R. A. & Stern, N. H., 1973. "An econometric model of the supply and control of recorded offences in England and Wales," Journal of Public Economics, Elsevier, vol. 2(4), pages 289-318.
  17. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
  18. David B. Mustard, 2003. "Reexamining Criminal Behavior: The Importance of Omitted Variable Bias," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 205-211, February.
  19. 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.
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