Income Inequality and Crime: Evidence from Sweden

Abstract: In this thesis, I examine the relationship between income inequality and different crime rates in Sweden using a panel of Swedish municipality-level data between year 2004 and 2016. Income inequality is mainly measured by two different ratios between the share of people in different fixed income brackets. To account for a possible reverse causality between income inequality and crime rates, I calculate predicted income inequality measures based on the national income growth rate, to use as instrument for the actual income inequality measures. According to my findings there is a robust relationship between income inequality and violent crimes, and a fairly robust relationship between income inequality and property crimes where an increase in income inequality is associated with an increase in criminal activity.