Youth Unemployment and Crime - New Evidence from the 21th century

Abstract: In this paper we investigate the effect of youth unemployment on crime. We draw on newly found evidence showing a weak link between traditional theory of the income channel of crime and unemployment applied to young people. Stressing the importance of idle time available to commit crime, we estimate the effect of unemployment using instrumental regression and the policy changes in labor market programs following the Swedish election of 2006. Using monthly data from 21 Swedish counties we find a strong link between youth unemployment and crime during the turbulent period between 2007 and 2011. We show that the definition of unemployment matters and that there is a need to take into account different labor market programs when estimating the effect of unemployment using aggregated data.