Crime Rates Versus Labor Market Conditions; Theory and Time-Series Evidence

The aim of this paper is to examine the impact of labor market conditions, represented by male civilian unemployment rates, on seven major categories of crime. We propose a theoretical model from which the positive macro relationship between the unemployment rate and the crime rate is explicitly derived. The solution of the proposed model shows the concurrent counter-cyclical movements of the unemployment and crime rates, which is found to be consistent with the U.S. time series data from the first quarter of 1970 to the fourth quarter of 1983. Thus, we propose a view that an increase in the unemployment rate triggers a subsequent increase in the crime rate. Further, we find that the unemployment rate is statistically exogenous in the VAR model, which indicates a fact that there lie the economic forces and motivations behind the positive relationship between the unemployment rate and the crime rate.