82nd International Atlantic Economic Conference

October 13 - 16, 2016 | Washington, USA

Factors explaining the mystery of declining crime rates

Sunday, October 16, 2016: 11:55 AM
Srabana Gupta, Ph.D. , Economics,, St. Thomas University, Miami Gardens, FL
Claudia Avila, Student , School of Business, St. Thomas University, Miami Gardens, FL
Anishka Romeo , School of Business, St. Thomas University, Miami Gardens, FL
According to the Federal Bureau of Investigation, the national crime rate in United States had an upward trend between 1962 and 1991. However, there has been a steady decline in the crime rate in United States since 1991. The crime rate in United States today is about half of what it was in 1991. Violent crime has fallen by about 50 percent since 1991 while the property crime rate has fallen by about 40 percent. An obvious question arising in the criminal justice system is what contributed to this enormous drop in crime rate.

While there are numerous social, economic and demographic factors that affect the crime rate, the primary aim of this research is to empirically examine how the strength of the economy impacts crime rate by examining a panel dataset consisting of both national and state level information for the United States between 1970 and 2015. We use OLS, nonlinear and fixed effect models to estimate the effect of each variable on crime rate.

The dependent variable in our study is the crime rate. We plan to conduct our analysis for the overall crime rate, the violent crime rate and the property crime rate separately. The independent macroeconomic variables included in the study are the unemployment rate, average household income, consumer confidence and the GDP growth rate.  In addition to these selected economic variables, we include certain demographic and social factors. Among these, the most important one from the political and policy perspective is the gun possession rate. Other independent variables included in the study are the divorce rate and the educational attainment

We hypothesize that the level of employment, average household income,  GDP growth rate and consumer confidence will reduce the crime rate; the gun possession rate and the divorce rate will directly affect the crime rate and educational attainment will lower crime rate.  Preliminary results that use the national overall crime rate do not support our hypotheses in the case of level of unemployment and median household income. We will investigate if the conclusions differ for state level data and/or the segregated data measuring the violent and the property crime rate. The findings will be valuable in understanding the impact of the economy on law enforcement.

Key words: Crime; Macroeconomic variables; Gun Possession.

JEL Classification: J21; K42