Economic inequality has long been considered an important determinant of crime. Existing evidence, however, is mostly based on inadequately aggregated data sets, making its interpretation less than straightforward. Using tract- and county-level U.S. Census panel data, I decompose county-level income inequality into its within- and across-tract components and examine the extent to which county-level crime rates are influenced by local inequality and economic segregation. I find that the previously reported positive correlation between violent crime and economic inequality is largely driven by economic segregation across neighborhoods instead of within-neighborhood inequality. Moreover, there is little evidence of a significant empirical link between overall inequality and crime when county- and time-fixed effects are controlled for. On the other hand, a particular form of economic inequality, namely, poverty concentration, remains an important predictor of county-level crime rates.
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I am grateful to two anonymous referees, Seth Sanders, Phil Cook, Peter Arcidiacono, Joe Hotz, and Chris Timmins for valuable comments. I also thank seminar participants at Duke University and Osaka University of Economics for discussions and comments. This work was supported by the research fund of Hanyang University (HY-201400000001597).
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