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Crime and Economic Incentives

We explore the role that economic incentives, particularly changes in wages at the bottom end of the wage distribution, play in determining crime rates. We use data on the police force areas of England and Wales between 1975 and 1996 and find (relative) falls in the wages of low-wage workers lead to increases in crime. We carry out a number of experiments with different wage measures, including a wage measure that accounts for the effects of changes in the composition of employment. These reinforce the picture of a strong association between the low-wage labor market and crime. The result that incentives play a central role is reinforced further by the strong impact on crime of deterrence measures and of a measure of the returns to crime.

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