Unemployment and Crime - Exploring the Link in Times of Crises

Abstract: Theories of Economics of Crime suggest that the unemployment rate should influence the crime rates and especially property crime rates. In this paper I investigate the effect of three different types of unemployment on crime rates (total unemployment (age 16-64), youth unemployment (age 18-24) and long-term unemployment (age 20-64)). Although theory is mostly applicable on property crimes I also include some violent crimes. I examine the proposed link by using a panel data set of 288 Swedish municipalities for the period of 1997-2009. The time period exhibits large variations in the unemployment rates, which offers a good opportunity to isolate the unemployment effect. In this paper I find evidence of an association between unemployment and crime. In the Baseline Model, total unemployment seems to have a significant effect on mainly property crimes. Youth unemployment exhibits a weaker relationship overall but with a significant effect on burglary and narcotic crimes. When investigating long-term unemployment I find it to have a significant effect on both violent crimes and property crimes. This reveals a possible discrepancy between reality and basic theory, which suggests a correlation between unemployment and property crimes only.