Crime and Inflation: Preliminary Cross-National Evidence

Richard RosenfeldUniversity of Missouri – St. Louis

USA

Inflation is the cruelest tax.Anon

New Consensus?

• Recent US research reveals robust effects of changing economic conditions on crime rates

• Beyond the unemployment rate: GDP, wages, consumer sentiment

• Direct effects limited to property crime; indirect effects on violent crime

Great Recession

• Unemployment rose, economic growth stalled, consumer sentiment plunged during 2008-09 recession

• Crime rates fell• Resurgence of the “consensus of doubt”

Was the Great Recession Different?

• Unlike in previous recessions, inflation rates at historic lows– Prices dropped in 2009 for first time in over 50 years

• Anecdotal evidence of inflation – crime connection– 1930s: price deflation– 1950s: low inflation– 1960s: rising inflation– 1970s: stagflation

Falling crime rates

Rising crime rates

Prior Research

• Scattered US studies of inflation effects on crime

• All show significant positive effect• Little theoretical development• No cross-national research

Inflation vs. Other Indicators of Economic Adversity

• More widespread• More immediate• Closer relationship to demand for stolen

goods

Logic Model: Inflation and the Market for Stolen Goods

• Supply– Offenders sell or trade goods they do not consume or

give away– Offenders respond to incentives, including demand for

stolen goods• Demand– Consumers “trade down” as prices rise– Stolen goods are “inferior goods”: demand increases

as prices rise (or aggregate income falls)– Acquisitive crime rises with increases in demand for

stolen goods

Inflation and Violent Crime

• Trafficking stolen goods risky business• Underground markets “stateless”

locations• Violence potent enforcement mechanism

Research Issues

• Are year-over-year changes in crime related to inflation?

• Is the relationship between crime and inflation nonlinear?

• Do former communist nations affect the relationship between inflation and crime?

• Are the effects of inflation on crime independent of those of GDP and unemployment?

• Does inflation condition the effect of unemployment on crime?

Data and Methods• DVs: Homicide, Robbery, and Burglary Rates for 20

Nations, 1990 – 2010– European Sourcebook of Crime and Criminal Justice Statistics– Eurostat (2008-10)

• IVs: Inflation, unemployment, GDP per cap, nation and period effects– World Bank– International Monetary Fund

• Fixed effects panel models with panel corrected standard errors– Variables first-differenced, except where noted

SampleAustriaBulgaria DenmarkEngland & WalesEstoniaFinlandFranceGermanyGreeceHungary

IrelandItaly NetherlandsNorthern Ireland NorwayPoland ScotlandSweden SwitzerlandUnited States

Summary Descriptive and Bivariate Results

Crime as a Non-Linear Function of Inflation

Burglary Example

Multivariate Results by Crime Type

Discussion

• Crime is a nonlinear function of inflation• Inflation effects are small but robust• Inflation conditions the effect of unemployment

on homicide and robbery, but not burglary• Economic growth has sizable and robust effects

on crime– Positive effect of growth on homicide needs further

exploration

Next Steps

• Add other economic indicators– Consumer sentiment– Poverty, inequality

• Add other controls– Age composition– Divorce rate– Urbanization