Exploring the crime drop in European Union homicide rates using econometric modelling

In this study, we employ a newly developed time series econometric approach to investigate the development in crime rates in various members states of the European Union (EU) between 1968 and 2019. We propose a panel data model with stochastically time-varying factors that also includes country-specific effects. This model enables us to evaluate the existence of a common EU crime trend, including a crime drop, to describe how individual countries depart from this common trend, and to estimate its association with macroeconomic and demographic explanatory variables. To have an equivocal measure of crime over the countries for the period of interest, we use homicide rates based on the Mortality Database from the World Health Organization. Results confirm the presence of a crime drop in the EU, be it stronger in Western EU countries than in Eastern EU countries. We also find that economic conditions explain a small portion of the crime trends in the EU; with macroeconomic activity (economic growth) being more relevant for Eastern EU countries, and macroeconomic performance (welfare growth) for Western EU countries. The young adult ratio (share of 25 to 34 year-olds in the total population) substantially explains the crime trend and drop in Western EU countries only. Our findings illustrate how the new model can be used to analyze the trends in crime, the fit from explanatory variables, and the differences in countries.