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Does Unemployment Increase Crime?: Evidence from U.S. Data 1974-2000

Does Unemployment Increase Crime?: Evidence from U.S. Data 1974-2000 Abstract: OLS may understate the effect of unemployment on crime because of the endogeneity problem (Raphael and Winter-Ember 2001). In this paper, we use changes in the real exchange rate, state manufacturing sector percentages, and state union membership rates as novel instrumental variables to carry out 2SLS estimations. We find a one-percentage-point increase in unemployment would increase property crime by 1.8 percent under the OLS method, but that the elasticity goes up to 4 percent under 2SLS. The larger 2SLS effect has significant policy implications because it explains 30 percent of the property crime change during the 1990s. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Human Resources University of Wisconsin Press

Does Unemployment Increase Crime?: Evidence from U.S. Data 1974-2000

Journal of Human Resources , Volume 43 (2) – Apr 4, 2008

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Publisher
University of Wisconsin Press
Copyright
Copyright © University of Wisconsin Press
ISSN
1548-8004
Publisher site
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Abstract

Abstract: OLS may understate the effect of unemployment on crime because of the endogeneity problem (Raphael and Winter-Ember 2001). In this paper, we use changes in the real exchange rate, state manufacturing sector percentages, and state union membership rates as novel instrumental variables to carry out 2SLS estimations. We find a one-percentage-point increase in unemployment would increase property crime by 1.8 percent under the OLS method, but that the elasticity goes up to 4 percent under 2SLS. The larger 2SLS effect has significant policy implications because it explains 30 percent of the property crime change during the 1990s.

Journal

Journal of Human ResourcesUniversity of Wisconsin Press

Published: Apr 4, 2008

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