Skip to main content

Advertisement

SpringerLink
Log in

The Short-Run Effects of the Great Recession on Crime

  • Original Article
  • Published:
Journal of Economics, Race, and Policy Aims and scope Submit manuscript

Abstract

The Great Recession had the most severe impacts on the unemployment rates of the racial and ethnic minorities as well as less-educated young men. There were cross-sectional variations of these disproportionate adverse impacts. This study exploits the changes in regional variations of the unemployment rates of unskilled men before and after the Great Recession to explain the sharp fall in aggregate crime rates in the post-recession recovery period. Our 2SLS approach uses plausible exogenous sources of changes in the state employment growth of minimum wage workers induced by the national employment growth of minimum wage workers. We find that changes in regional variations of the unemployment rates of unskilled young men can explain approximately 25% of the fall in the aggregate crime rate in the post-recession expansionary period. Estimating the heterogeneous impacts of unskilled young men by race, we find that the fall in aggregate crime rate was mainly driven by the changes in the unemployment rates of young black men.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3
Fig. 4

Similar content being viewed by others

Notes

  1. The upper panel of Fig. 2 shows that during the recession the property crime rate fell from 0.42 to 0.39 and the lower panel indicates that the violent crime fell from 0.055 to 0.048 during the same period.

  2. The construction of our instruments is an extension of a strategy developed by Bartik (1991) and then popularized by Blanchard and Katz (1992).

  3. Following Gould et al. (2002), we do not use any weights because we already use the population of a state to create the dependent variable.

  4. Using the Current Population Data from 1979–2011, Hoynes et al. (2012) estimate that 1% increase in the state unemployment rate leads to a 1.1% increase in unemployment rate of white men, 1.8% for black men, and 1.25% for Hispanic men. The heterogeneous impacts of state unemployment rate by education show that 1% increase in the state unemployment rate leads to a 1.75% increase in unemployment rate of high school dropouts and 0.4% for college graduates.

  5. Following the existing literature, unskilled workers are classified as high school dropouts.

  6. In a similar settings, Card (1992) estimates the effects of the changes in the federal minimum wage on employment by using the regional variations of the share of the teenage employment.

  7. Note that we have 51 states because we count District of Columbia a state.

  8. The full list of changes in unemployment rates by state is shown in the Appendix Table 6.

  9. Where n is the number of observations and \({R_{e}^{2}}\) is the R2 from the second stage estimated error regression. The two core endogenous regressors are unemployment rate of unskilled men and it’s interaction term with the post-Great Recession time dummy.

  10. Following Hoynes et al. (2012), we define whites are only Caucasian, blacks are African American and the Hispanic includes both black Hispanic and white Hispanic.

References

  • Angrist, J, Krueger A. Instrumental variables and the search for identification: from supply and demand to natural experiment. J Econ Perspect 2001;15(4):69–85.

    Article  Google Scholar 

  • Angrist, J, Pischke J. Mostly harmless econometrics. Princeton, New Jersey: Princeton University Press; 2009, pp. 69–85.

    Google Scholar 

  • Autor, D, Dorn D, Hanson G. The China syndrome: local labor market effects of import competition in the united states. Am Econ Rev 2013;103(6):2121–2168.

    Article  Google Scholar 

  • Autor, D, Duggan M. The rise in the disability rolls and the decline in unemployment. Q J Econ 2003;118 (1):157–205.

    Article  Google Scholar 

  • Bartik, T. 1991. Who benefits from state and local economic development policies? W.E. Upjohn Institute.

  • Becker, G. Crime and punishment: an economic approach. J Polit Econ 1968;76(2):169–217.

    Article  Google Scholar 

  • Blanchard, O, Katz L. 1992. Regional evolutions, Brookings Papers on Economic Activity.

  • Card, D. Using regional variation in wages to measure the effects of the federal minimum wage. Ind Labor Relat Rev 1992;46(1):22– 37.

    Article  Google Scholar 

  • Cook, P, Zarkin G. Crime and the business cycle. J Leg Stud 1985;14(1):115–128.

    Article  Google Scholar 

  • Cullen, J, Levitt S. Crimes, urban fight and the consequences for cities. Rev Econ Stat 1999;81(2):159–169.

    Article  Google Scholar 

  • Deming, D. Better schools, less crime?. Q J Econ 2011;126:2063–2115.

    Article  Google Scholar 

  • DeNavas-Walt, C, Proctor B, Smith J. 2011. Income, poverty, and health insurance coverage in the united states: 2010, Current Population Survey Reports pp 60–239.

  • Ehrlich, I. Participation in illegitimate activities: A theoritical and empirical investigation. J Polit Econ 1973; 81(3):521–565.

    Article  Google Scholar 

  • Elsby, M, Hobjin B, Sahin A. The labor market in the great recession. Brook Pap Econ Act 2010;2:1–48.

    Article  Google Scholar 

  • Farber, H. 2011. Job loss in the great recession: historical perspective from the displaced workers survey, 1984-2010 NBER Working Paper No 17040.

  • Farrington, D, Gallagher B, Morley L, Ledger R, West D. Unemployment, school leaving, and crime. Br J Criminol 1986;26:335–356.

    Article  Google Scholar 

  • Freeman, R. The relation of criminal activit to black youth employment. Review of Black Political Economy 1987; 16:99–107.

    Article  Google Scholar 

  • Freeman, R. Why do so many young american men commit crimes and what might we do about it?. Journal of Economic Prespectives 1996;10(1):25–42.

    Article  Google Scholar 

  • Goodman, C, Mance S. Employment loss and the 2007-09 recession: an overview, U.S. Department of Labor. Bureau of Labor Statistics 2011;134(4):3–12.

    Google Scholar 

  • Gould, E, Weinberg B, Mustard D. Crime rates and local labor market opportunities in the United States 1977-1997. Rev Econ Stat 2002;84(1):45–61.

    Article  Google Scholar 

  • Greenberg, D. Age, crime and social explanation. Am J Sociol 1985;91:1–21.

    Article  Google Scholar 

  • Grogger, J. Arrests, persistent youth joblessness, and black/white employment differences. Rev Econ Stat 1992; 74:100–106.

    Article  Google Scholar 

  • Grogger, J. The effects of arrests on the employment and earnings of young men. Q J Econ 1996;110:51–72.

    Article  Google Scholar 

  • Grogger, J. Market wages and youth crime. J Labor Econ 1998;16(4):756–791.

    Article  Google Scholar 

  • Hansen, K. Education and the crime-age profile. Br J Criminol 2003;43:141–168.

    Article  Google Scholar 

  • Hindelang, M. Variations in sex-race-age-spcific. Am Sociol Rev 1981;46(4):461–474.

    Article  Google Scholar 

  • Hjalmarsson, R. Criminal justice involvement and high school completion. J Urban Econ 2008;63:613–630.

    Article  Google Scholar 

  • Holzer, H. 2007. Collateral costs: the effects of incarceration on the employment and earnings of young workers. IZA Discussion Paper No. 3118.

  • Hoynes, H, Miller D, Schaller J. Who suffers during recessions?. J Econ Perspect 2012;26(3):27–47.

    Article  Google Scholar 

  • Juhn, C, Kevin M, Topel R. Why has the natural rate of unemployment increased over time?. Brook Pap Econ Act 1991;2:75–142.

    Article  Google Scholar 

  • Kling, J. Incarceration length, employment and earnings. Am Econ Rev 2006;96:863–876.

    Article  Google Scholar 

  • Kochhar, R. 2011. In two years of economic recovery, women lost jobs, men found them. Pew Social and Demographic Trends pp. 1–25.

  • Levitt, S. Using electoral cycles in police hiring to estimate the effect of police on crime. Am Econ Rev 1997; 87:270–290.

    Google Scholar 

  • Levitt, S. Alternative strategies for identifying the link between unemployment and crime. J Quant Criminol 2001; 17(4):377–390.

    Article  Google Scholar 

  • Levitt, S. Understanding why crime fell in the 1990s: Four factors that explain the decline and six that do not. J Econ Perspect 2004;18(1):163–190.

    Article  Google Scholar 

  • Levitt, S, Lochner L. The determinants of juvenile crime, Risky Behavior among Youths: An Economic Analysis, ed Jonathan Gruber. Chicago: University of Chicago Press; 2001a.

  • Lin, M. 2008. Does unemployment increase crime? evidence from u.s. data 1974-2000. Journal of Human Resources XLIII 413–436.

    Article  Google Scholar 

  • Lochner, L. Education, work and crime: a human capital approach. Int Econ Rev 2004;45:811–843.

    Article  Google Scholar 

  • Lochner, L, Moretti E. The effect of education on crime: evidence from prison inmates, arrests, and self-reports. Am Econ Rev 2004;94(1):155–189.

    Article  Google Scholar 

  • Lott, J. An attemp at measuring the total monetary penalty from drug convictions: The importance of an individual’s reputation. J Leg Stud 1992;21(1):159–187.

    Article  Google Scholar 

  • Machin, S, Costas M. Crime and economic incentives. J Hum Resour 2004;39(4):958–979.

    Article  Google Scholar 

  • Machin, S, Marie O, Vujic S. The crime reducing effect of education. Econ J 2011;121:463–484.

    Article  Google Scholar 

  • Raphael, S, Winter-Ember R. Identifying the effect of unemployment on crime. J Law Econ 2001;44(1): 259–283.

    Article  Google Scholar 

  • Rothstein, J. 2011. Unemployment insurance and job search in the great recession. Brookings Papers on Economic Activity pp. 143–213.

  • Sampson, R, Laub J. Life-course desisters: trajectories of crime among delinquent boys followed to age 70. Criminology 2003;41:555–592.

    Article  Google Scholar 

  • Sierminska, E, Takhtamanova Y. Job fows, demographics, and the great recession. Res Labor Econ 2011;32: 115–154.

    Article  Google Scholar 

  • Staiger, D, Stock J. Instrumenatal variables regression with weak instruments. Econometrica 1997;65(3): 557–586.

    Article  Google Scholar 

  • Steffensmeier, D, Ulmer J, Kramer J. The interaction of race, gender and age in the criminal sentencing: the punishment cost of being young, black, and male. Criminology 1998;36(4):763–798.

    Article  Google Scholar 

  • Stock, J, Yogo M. 2001. Testing for weak instruments in linear iv regression, Working Paper, Harvard University.

  • Topel, R. What have we learned from empirical studies of unemployment and turnover?. Am Econ Rev Pap Proc 1993;83(2):110–115.

    Google Scholar 

  • Viscusi, WK. Market incentives for criminal behavior. The black youth employment crisis. In: Freeman R and Holzer H, editors. Chicago: University of Chicago Press; 1986. p. 301–346.

  • Wilson, W. When work disappears: the world of the new urban poor. New York: Alfred Knopf; 1996.

    Google Scholar 

Download references

Acknowledgements

I would like to thank Daniel Giedeman, Gary Hoover, Firat Demir, Zexuan Liu and the three anonymous referees for all the valuable comments and suggestions.

Author information

Authors and Affiliations

  1. Department of Economics, University of Oklahoma, 308 Cate Center Drive, Norman, OK, 73072, USA

    Pallab Kumar Ghosh

Authors
  1. Pallab Kumar Ghosh
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Pallab Kumar Ghosh.

Appendix

Appendix

Table 8 Appendix Table 1: Demographic characteristics of the unskilled unemployed men of age 18–30 by race
Full size table
Table 9 Appendix Table 2: The first stage of the two stage least square regressions
Full size table
Table 10 Appendix Table 3: Falsification tests by using fake recession years
Full size table
Table 11 Appendix Table 4: Robustness check by using a two decades lag of industry composition of minimum wage workers to construct instruments
Full size table
Table 12 Appendix Table 5: The effects of unemployment rates of unskilled men on property and violent crime rates, 2005–2014
Full size table
Table 13 Appendix Table 6: Changes in unemployment rates of unskilled young men from 2005–2009 to 2010–2014
Full size table
Table 14 Appendix Table 7: Summary statistics of property and violent crime rates by metro and nonmetro area (mean and standard deviation)
Full size table

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Ghosh, P.K. The Short-Run Effects of the Great Recession on Crime. J Econ Race Policy 1, 92–111 (2018). https://doi.org/10.1007/s41996-018-0014-8

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s41996-018-0014-8

Keywords

Search

Navigation