The Relationship between the Business Cycle and Crime. A Literature Review

Table of Contents

1. Introduction

2. Stylized Facts

3. The Business Cycle and Crime

3.1 Economics of Crime

3.1.1 Theoretical Frameworks

3.1.2 The Argument of Cantor and Land (1985)

3.1.3 The Problem of Identification

3.2 Labor Market Opportunities and Crime

3.2.1 Simple Linear Regression Models

3.2.2 Instrumental Variable Approaches

3.2.3 Alternative Strategies

3.3 Economic Growth and Crime

4. Combining the Results

5. Discussion and Conclusion

Research Objectives and Core Themes

This master's thesis investigates the complex relationship between the business cycle and criminal activity, with a primary focus on evaluating how unemployment and labor market opportunities influence crime rates. The work aims to reconcile diverging empirical evidence by analyzing theoretical frameworks, methodological approaches, and the role of socioeconomic variables.

• The theoretical relationship between economic performance and crime supply.
• Methodological challenges in identifying causal links (e.g., omitted variable bias).
• Evaluation of "opportunity" versus "motivation" effects of unemployment.
• Synthesis of empirical findings across different crime subcategories and regions.

Excerpt from the Book

Summary of Chapters

1. Introduction: Outlines the societal relevance of crime as a global problem and introduces the economic perspective on criminal behavior.

2. Stylized Facts: Provides a descriptive overview of crime trends in the U.S. and Europe, highlighting the categorization of property and violent crimes.

3. The Business Cycle and Crime: Examines theoretical models, specifically focusing on how labor market conditions influence individual decisions between legal and illegal activities.

4. Combining the Results: Synthesizes empirical evidence from various studies to evaluate the consistency of the relationship between unemployment and crime across different crime categories.

5. Discussion and Conclusion: Reflects on the limitations of existing research and suggests future directions for empirical analysis regarding the business cycle and crime.

Keywords

Business Cycle, Unemployment, Crime Rates, Property Crime, Violent Crime, Labor Market Opportunities, Opportunity Effect, Motivation Effect, Becker Model, Cantor and Land, Instrumental Variables, Economic Growth, Socioeconomic Factors, Deterrence, Empirical Review.

Frequently Asked Questions

What is the core focus of this thesis?

The thesis provides a comprehensive literature review on the empirical and theoretical relationship between the business cycle—specifically unemployment—and criminal activities.

What are the primary themes discussed?

The work covers theoretical frameworks of criminal behavior, the impact of labor market opportunities, identification problems in empirical studies, and the distinction between property and violent crime.

What is the main research objective?

The objective is to determine how economic fluctuations affect crime supply and to clarify why empirical findings in the literature often show conflicting or weak results.

Which methodology is applied?

The research is a systematic literature review that evaluates various econometric techniques, including Ordinary Least Squares (OLS), Instrumental Variable (IV) approaches, and General Method of Moments (GMM).

What does the main body address?

It addresses the historical development of crime economics, the "opportunity" versus "motivation" hypothesis, and the identification of causal links using panel data and instrumental variables.

Which keywords characterize the work?

Key terms include business cycle, unemployment, crime supply, instrumental variables, opportunity effect, and motivation effect.

How does the author explain the "opportunity effect"?

The opportunity effect suggests that during recessions, individuals have fewer job prospects and spend more time at home, which increases guardianship and thereby reduces the vulnerability of targets, lowering property crime.

What is the "motivation hypothesis" in this context?

The motivation hypothesis argues that a decrease in legitimate economic prospects increases the incentive to engage in crime as a substitute for lost income, particularly as support structures for the unemployed deteriorate over time.