A Research Report On “Relationship between crime and unemployment”

1. A
Research Report
On
“Relationship between crime and unemployment”
MASTER IN ECONOMICS
(2014-2015)
Submitted To:- Submitted By :-
Miss.Anbreen Asim ishaq
3rd
Semester,
Dept. of Economics
University Of Haripur
DEPARTMENT OF ECONOMICS

2. Table of content
Table of content............................................................................................. 2
Introduction:.................................................................................................. 3
Literature review: .......................................................................................... 5
Brief analysis ................................................................................................. 7
Definition of crime...................................................................................................................7
Definition of Unemployment ...................................................................................................7
The Relationship between Crime and Unemployment:................................... 8
Descriptive analysis ..................................................................................... 10
PAKISTAN STATUS IN THE WORLD OF CRIME........................................................................10
Table 1 .............................................................................................................................10
CRIME SCENARIO IN PAKISTAN .................................................................... 11
Table 2 .............................................................................................................................12
CRIME SCENE IN PAKISTAN WITH TYPES....................................................... 14
Table 3 .............................................................................................................................14
CONCLUSIONS.............................................................................................. 15
References:.................................................................................................. 16

3. Introduction:
Crime is a major social concern. Every country whether developed or developing wants to
keep the criminal activities under strict observation with the help of law enforcement
authorities by root out the actual causes of these illegal activities. Many studies have been
conducted in this regard in different social and economic fields to find the causes of crime. If
we talk about the effect of economic conditions on crime then economy and crimes are linked
with each other. Decreasing economic incentives automatically increase the incentives of
illegitimate (criminal) activities for individuals (Machin, 1998). Economic and crime relation
was first elaborated by Becker in 1968. Becker’s paper since the beginning of 80’s opens the
door to a new field of empirical research whose main purpose was to verify and study the
economic variables that determine criminal choices and behaviors of individual. According to
Becker criminal acts result from a rational decision based on a cost benefit analysis. Becker
argued that a criminal should be viewed, not as a helpless victim of social oppression, but a
rational economic agent.
Different model has been developed to check the relationship of economic variables like
poverty, inflation, unemployment with increasing crime (Machin, 1998). Labor market and
crimes are linked. Unemployment increases the incentives for criminal activities as low
income or no income makes the cost benefit analysis easy for individuals (Fleisher, 1963).
Unemployment and crime go hand in hand (Reilly & Witt, 1992; Britt, 1997;, Elliott &
Ellingworth, 1998; Kapuscinski et al., 1998; Witt et al., 1998; Lin, 2007;, Buonanno &
Montolio, 2008; Baron, 2008). The poverty risk induced by, unemployment inclines
unemployed individuals to seek alternative strategies for, securing an income, including in
some cases, criminal activities. And while, poverty is a frequent consequence of becoming
unemployed, unemployment also, provides other motives for engaging in crime.
Unemployment generates negative, stimuli from social interactions, frees the individual from
the social control, imposed by institutions such as workplace and the moral judgment of
colleagues,, and promotes idleness. These are all mechanisms that, according to theory, may,
affect criminal behavior during unemployment, In most countries, however, the government
takes various measures intended to, reduce the negative consequences of unemployment.
Such measures are highly, likely to also affect crime among the unemployed by ameliorating
the negative, consequences of unemployment that may lead to criminal activity. One of the,
most obvious examples of such a measure is welfare benefits, which reduces the, necessity
for engaging in criminal activity as a method of maintaining an income, (Zhang, 1997; Britt,
1997; Kapuscinski et al., 1998; Lin, 2007). In addition to, providing welfare benefits,
governments often also operate other programs that, target the unemployed. Most Western
countries require unemployed to make use, of reemployment services that consist of elements
such as mandatory meetings, with caseworkers, courses on how to apply for jobs, compulsory
participation in, training courses etc. (for U.S. examples of such programs, see Plesca &
Smith,, 2007; Black et al., 2003; for European examples, see Kluve & Schmidt, 2002;, Kluve,
2006). These active labor market programs (ALMPs), fulfill the dual, purposes of helping the
unemployed to find work and of monitoring their activities, to ensure that they fulfill the
requirements for receiving welfare benefit., A number of studies analyze whether generous
welfare benefits reduce crime, among the unemployed. These studies show that benefit levels
and crime levels, are negatively correlated (e.g. at the state level), which indicates that
economic, deprivation is one important explanation for the link between unemployment and,

4. crime (Calvó-Armengol et al., 2007; Worrall, 2005; Farral, 2006; Savolainen,, 2000;
DeFronzo, 1997; Zhang, 1997; Devine et al. 1988; DeFronzo 1983, 1996)., But while theory
suggests that also ALMPs affect the link between unemployment, and crime, we still have no
evidence as to how these programs, and the intensity, with which they are applied, affect
crime among unemployed. Knowledge, concerning this issue is important, as it will help to
reveal the extent to which, institutional measures taken during unemployment affect crime,
and thereby, clarify when unemployment leads to crime. The present study addresses this
shortcoming by analyzing whether crime levels, among the unemployed vary with the
intensity of the ALMPs to which they are, exposed (i.e. I focus on crime committed during
the unemployment spell). To, investigate this question, the study exploits a social experiment
in which newly, unemployed individuals were randomly chosen to receive the standard
package of, ALMPs (the control group) or a package of similar, but intensified ALMPs,,
requiring higher levels of participation in job search and training courses, and, exposing the
unemployed to more social control (the treatment group). This type, of design allows us to
draw valid conclusions regarding the causal effect of, intensified ALMPs on the criminal
activity of unemployed persons.

5. Literature review:
Many studies have been conducted on the relationship between crime and its determinants.
The results of these, studies show that these various factors are responsible for promoting
crime in the world. Lee (2002), examines, the relationship between labour market conditions
and various crime series in three Asia-Pacific countries, Australia, Japan and South Korea.
Johansen maximum likelihood cointegration and Granger causality tests were, applied to time
series data to see the existence of longrun equilibrium or a causal link between
unemployment, and crime variables. The results of the study provide a strong support for a
long-run equilibrium relationship, between unemployment and various crime series. Coomer
Nicole (2003), undertook a study to examine the influence of macroeconomic factors on
crime. He, applied OLS regression to find out the results. In his analysis, he first included
unemployment, poverty, prison, population, high school and college education level and
income disparities as independent variables and run the, regression to get the relationship. He
then dropped the insignificant variables and rerun the regression and found, that
unemployment, inflation and poverty influence crime positively. Papps & Winkelmann
(1999), investigates, the relationship between unemployment and crime and range of
categories of crime in New Zealand with the, limitations of sixteen regions for the period of
1984-1996 by using country level and time loop data including, random and fixed effect
models. Unemployment and crime two variables are considered. Two way fixed effect,
techniques have been used, the result shows that there is a significant effect of unemployment
on crime., Raphel & Winter-Ebmer (1999), investigates the relationship between
unemployment and crime by using US, country data including time trends and state effect
and year effect. Property crime, violent crime, prison,, population, alcohol consumption, oil
cost and income are the variable which is considered. OLS and SLS, techniques have been
used. The result shows that significantly positive effect of unemployment on property, crime.
The evidence of violent crime is considerably weaker. Edmark (2003), investigates the effect
of, unemployment on crime for the period of 1988-1999 in Swedish countries by using fixed
effect including time, series and country level data. Variables are avg. Income, education,
social allowances population density, considered. Linear and quadratic time trend techniques
have been used. The result shows that unemployment has a positive and significant effect on
crime., Maria & Meloni (2004), investigate the determinants of crime by using panel data
approach for the period of, 1990-1999 in Argentina. Crime rate, probability of imprisonment,
GDP, unemployment rate, gini Coefficient,, and inequality variables are considered. Co
relational technique has been used. The result shows that the effect of, unemployment rate
and inequality rate is significantly associated with crime rate. Foon Tang (2004), investigates,
the relationship between unemployment, inflation and crime rate by using annual data for the
period of 1970-, 2006 in Malaysia. Crime rate, inflation and unemployment rate variables are
considered. Bartlett Corrected trace, test technique has been used. The result shows that there
is a positive significant effect of inflation and, unemployment rate on crime but inflation is
not positively associated with crime rate in short run. Trogdon, (2006), investigates the
relationship between unemployment and crime in sixteen states by using country level, data.
Variables are per capita income, age, population (black and white) and amount of federal
funding for, education considered. Microsoft excel was used to run separate regression
analysis. The result shows that there is, a significant effect between unemployment and
crime., Gillani, Hafeez et (2009), investigates the relationship between crime and its various

6. factors such as, unemployment, poverty and inflation by using time series data from 1975-
2007 in Pakistan. Crime,, unemployment, poverty, and inflation variables are considered.
Granger causality test technique has been used to, determine the result. The result shows that
crime has significant effect on unemployment, poverty, and inflation., Authors recommended
that major determinants of crime should address fairly to check crime rate in Pakistan.,
Altindag (2009), investigates the impact of unemployment on crime by using country level
data of European, countries. Variables are unemployment, police force, GDP, urbanization,
considered. OLS (ordinary least square), and SLS techniques have been used. The result
shows that the unemployment of male with low education is, more influential in driving the
impact of the overall unemployment rate and crime. Lee (2009), investigates the, effect of
increasing unemployment on crime rate by using criminal or a worker record of crime. The
effect, depends upon the apprehension rate. Demographic variables are considered. The result
shows that the effect of, unemployment on crime is insignificant at low apprehension rate and
significant at high apprehension rate. Foon, Tang (2009), investigates the linkage between
inflation, unemployment and crime rate in Malaysia by using, annual data from 1970 to 2006.
Inflation, unemployment and crime rate variables are considered. Bartlett, corrected test
technique have been used. The result shows that inflation and unemployment are positively
related, to the crime rate but inflation is not significant in short run. Kangoh Lee (2009),
investigates the effect of, increasing unemployment rate and crime rate, by using panel data
approach in San Diego. Variables are, unemployment rate, crime rate, apprehension, and
unemployment insurance considered. The result shows that, the effect of unemployment on
crime is negative on low apprehension rate but positive on high rate of, apprehension. The
effect depends on apprehension rate., Omotor (2012), investigates the determinants of crime
in Nigeria, by using panel data set for the period of 2002, to 2005. Per capita income, crime
rate, population density variables are considered. Ordinary least square, technique has been
used to determine the result. The result shows that there is a significant effect of per capita,
income and population density ion crime. The study shows that there is another big reason of
increasing crime is, poor performance of law enforcement agencies. Author recommended
that performance of law enforcement agencies as well as basic needs of population should
improve so that crime should be under control.

7. Brief analysis
Definition of crime
In ordinary language, the term crime denotes an unlawful act punishable by a state. The term
"crime" does not, in modern criminal law, have any simple and universally accepted
definition, though statutory definitions have been provided for certain purposes. The most
popular view is that crime is a category created by law; in other words, something is a crime
if declared as such by the relevant and applicable law. One proposed definition is that a crime
or offence (or criminal offence) is an act harmful not only to some individual or individuals
but also to a community, society or the state ("a public wrong"). Such acts are forbidden and
punishable by law. The notion that acts such as murder, rape and theft are to be prohibited
exists worldwide. What precisely is a criminal offence is defined by criminal law of each
country. While many have a catalogue of crimes called the criminal code, in some common
law countries no such comprehensive statute exists.
Definition of Unemployment
Unemployment , represents the number of people in the work force who want to work but do
not have a job. It is generally stated as a percentage and calculated by dividing the number of
people who are unemployed by the total work force.
The work force is made up of those people who want to work; it excludes people who are
retired, disabled, and able to work but not currently looking for a position; for instance, they
may be taking care of children or going to college.

8. The Relationship between Crime and
Unemployment:
Crimes have always plagued every society in human history. The history of crime is as old as
history of mankind. The first crime was committed by Cain, the first son of Adam and Eve,
when he murdered his brother Abel out of jealousy. Crime is a major source of insecurity and
discomfort in every society. There is no doubt that crime inflicts enormous monetary and
psychological costs on society. The act of criminality gives rise to the feeling of insecurity
and fear to those who have not been a victim as well. This sense of panic of being victimized
generates negative effects on well being. Crime can be defined as a wrongdoing classified by
the state or the parliament of the country or law of the land. Each country sets out series of
acts (crime), which are prohibited, and punishes a criminal of these acts by a fine or
imprisonment or both. There is no universal and permanent definition of crime. It differs in
different times in different regions. According to Curzen, “A crime as an act or omission of
human conduct harmful to others which the state is bound to prevent. It renders the deviant
person liable to punishment as a result of proceedings initiated by the state organs assigned to
ascertain the nature, the extent and the legal consequences of that person’s wrongness” (see
Auolak,.1999).
Policies designed to increase jobs in country can have a direct, positive effect on crime rates.
A new study of crime across the world shows that crime rates rise and fall with
unemployment. But this truth is obscured by other factors. A Discussion Paper published for
the Centre for Economic Policy Research by two economists, Steven Raphael of the
University of California at San Diego and Rudolf Winter-Ebmer of the University of Linz,
finds support for the view held by most people that when men are out of a job they are more
likely to steal because the risks seem more worthwhile. The writers find a significant positive,
but also quantitatively large, impact of unemployment on several crime categories.
The prevalence of unemployment in an economy provides the unemployed persons an
impetus to commit crime for monetary gains. The crime rate is affected with labor market
conditions. For example, if unemployment rate increases, the opportunities for legal earnings
declined and crime score tend to jump up because real costs associated with crime for
unemployed labor force go down. A number of studies supported the notion that worsened
conditions in the labor market are associated with higher crime rates (see for instance, Levitt
1996; Doyle, et. al. 1999; Raphael and Winter-Ebmer 2001; Gould, et. al. 2002). For a
country where majority of the young is jobless crime may become a sport activity. According
to the theory of economics of crime, unemployment has a cost, i.e. it increases crime. In
addition high unemployment is costly as it keeps parts of the labor force out of production
and, if persistent is likely to decrease the skills and knowhow of the labor force. Crime is an
ailment to society which affects and attacks the rights of individuals. It is like a cancer
metastatic to society. It impacts the economic, social, and cultural development, both
nationally and internationally---a hard fact that we can no longer afford to ignore. The
incidence of crime has become an extremely important social and economic issue in Pakistan
and all over the world. The crimes impose enormous costs on victims, families of offenders
and society as a whole. It inflicts psychological and monetary damage to the society.

9. Crime has been one of the major problems of civilization from the beginning, and its
magnitude has increased over time. This paper explores the relationship between Crime and
unemployment. Economists traditionally use the unemployment rate as an indicator of the
amount of legitimate employment opportunities available to individuals. Therefore, a high
unemployment rate suggests that there are fewer employment opportunities available and
thus the opportunity cost of choosing crime over legitimate work is low (Becker, 1968,
Cornwell and Trumbull, 1994, Ehrlich, 1996, Myers, 1983, and Witte, 1980). However,
sociologists look at the unemployment rate as being an indicator of the “supply of suitable
victims” as well as the traditional economic perspective (Britt, 1994 and Cantor and Land,
1985). They suggest that as the unemployment rate increases there is a proportional decrease
in the supply of suitable victims because people have less to steal. This occurs because as
unemployment increases. Historically, there have been two major schools of thought
regarding the unemployment-crime, relationship, the first school focuses on the “supply of
offenders” while the second school focuses on the “supply of victims.” Economists have
traditionally focused on explaining the economic behavior of potential offenders and the way
they react to changes in economic conditions. One basic notion is that in order for an
individual to maintain a certain standard of living during a period of unemployment he/she
will become more likely to commit a criminal act. However, after being unable to fully
substantiate their hypothesis that a positive relationship should exist between unemployment
and crime a new school of thought developed. Sociologists and criminologists have recently
begun studying how unemployment affects the supply of suitable victims. Higher
unemployment rate is correlated with a wider decrease in production and consumption;
therefore there is less new merchandise in the “market” to be stolen. As Cantor and Land
(1985) note, a crime requires not just the supply of a motivated offender but also a suitable
target. Unemployment is a factor because the criminal individual is marked by the
deterioration of living standards, its emotional structure becomes unstable, the family is
affected and the person can not control their desires and in this context is influenced to
commit crimes. Crime is high during the economic crisis because people has no where to
work, the salary is low; they are being affected socially unprotected and therefore resort to
committing crimes. Profession as a criminal factor can influence the commission of offenses
related to individual specialization, a special interest in representing crime “white collar”.In
“White Collar Crime” published in 1949, Sutherland defines the crime as committed by the
individual in society and has a high social status, businessmen, politicians, senior
management etc. Analyzed legally, these offenses do not differ greatly from those committed
by other criminals, but the way the crime was committed is more refined, they benefit
because the social status of an indulgence overall, their reputation is not compromised, their
personality is determining the offense. Crime “white collar” is achieved through regulatory
gaps speculation, misinterpretation of the law. Sutherland pointed out that the usual crime
statistics present a picture of the criminal population composed of individuals belonging to
lower strata of society and economic privileges not enjoyed. This does not mean that crime in
the upper social classes do not include respected businessmen, politicians. Sutherland argued
that the most common, white-collar crime occurs through misrepresentation of the financial
situation of enterprises through stock manipulation and bribery of public figures in order to
secure profitable contracts, financial embezzlement, etc. Criminals with “white collar”
commit acts which are defined by Sutherland as a “violation of criminal law by persons with
high socio-economic status as part of their occupational class”. Education does not act

10. directly on reducing crime. In fact, the substance of other factors may increase crime being
directed to certain offenses that require the individual to be trained as fraud, tax evasion,
corruption, unfair competition, etc.
Descriptive analysis
PAKISTAN STATUS IN THE WORLD OF CRIME
To start with this section, we shall have a look at the crime picture in the, world as well as in
Pakistan. Table 1 provides the total number of crime of, the world top countries along with
other selected countries including, Pakistan.
Table 1 shows that the United States, Germany and United Kingdom are, the top three
countries in absolute numbers. Pakistan’s rank is 23rd amongst, other countries whereas India
is 10th
. Daily average of crime in Pakistan is 1144 as against 64870 in USA, 17164 in
Germany, 14166 in UK and 4834 in India.
*1999 Figure, **2007 Figure,
Source: Seventh United Nations Survey of Crime Trends and Operations of, Criminal Justice Systems
(United Nations Office on Drugs and Crime,, Centre for International Crime Prevention), Bureau of Police
Research, and Development, Ministry of Interior, Islamabad.
Table 1
Total Crime By Country

11. CRIME SCENARIO IN PAKISTAN
Crime Statistics of Pakistan shows that there is a rapid increase in the, number of crime
reported over time like other countries of the world. It may, be because of high
unemployment, rising poverty, increasing inflation and, urbanization. Some other non-
economic factors are also responsible for it. The impact of rising crime is not confined to the
illiterate and poor class of, society; even some wealthy, well-placed and educated persons are
also, involved in committing crime. They are in the race of accumulating wealth, through
illegal means. Furthermore, these people have sources to exploit, loopholes in the legal
system to get away with crime in Pakistan. Furthermore,, majority of the people who have
meager resources at their disposal to, meet their both ends are also involved in crime in the
country. The crime, statistics of Pakistan indicates that the country is not doing well in
economic,, social, cultural, technological, environmental, moral and spiritual fields.
Nowadays crimes have become more organized and some criminals, have gained the
patronage of powerful elites. The Government of Pakistan, had taken steps to control crime in
Pakistan in the past. For example, the, surveys were conducted to identify parts of the country
by city or areas, 84 Pakistan Economic and Social Review, where the incidence of crime was
relatively high along with their major, causes. Various steps were taken in those areas/cities
to check the crime but, unfortunately because of corruption, poor implementation of policies
and, rising terrorist attacks the circumstances were quite disappointing. Furthermore, lack of
justice and influence of powerful on judiciary also, encouraged crime in the country. The
available crime statistics show that the total crime cases registered, in 1947 at the time of
Independence were 73,105, which doubled to 129,679, in 1971. Then there is rapid increase
in crime rate particularly after 1980.The, total reported crime during the decade from 1980 to
1990 almost doubled, from 152,782 to 403,078 and the number of crime reached to 43804 in
2007. The annual growth rate of crime has generally been higher than that of, population
growth rate since 1951. These figures relate to the reported crime, only. No reliable figures
can be given about the unreported crime in the, country. However, about 30-50% crimes are
generally considered to be, unreported in Pakistan. Pakistan’s population is currently growing
at a rate of almost 2 percent, per annum. The total population at the time of Independence
was about 30, million and it is 158.17 million in 2007 (almost five times). Table 2 shows,
total population, total crime, their growth rates and crime committed per, population of
100,000 for selected years from 1951 to 2007. Table 2 shows that the number of crime per
100,000 population has, gone up from 226 to 340 during the reference period. In 1971, the
reported, crime per hundred thousand population were estimated at 206 that rose to, 323 in
1998. It shows an increase of 56.79 percent in crime. The reported, crime includes murders,
attempted murder, kidnapping for ransom, car, lifting, dacoity, rap, robbery and theft etc.
During the period from 1981 to, 1986, growth in crime rate had been over 4 percent per
annum, which, outstripped the population growth of 3 percent. This was an era of martial,
law, Afghan war, flow of Afghan refugees in the country, narcotics, trafficking, gun running,
and kidnapping for ransom. Crime population ratio given in the above-mentioned table
reveals that, in 1966, 180 offences were reported per 100,000 population. By the year, 1991,
it increased to 257 per 100,000 population, which shows an increase of, 40%. The situation
further worsened in 1998 when the reported offences, increased to 323 per 100,000 persons.

12. However, the total number of crime has shown increasing trend, yet on, the basis of crime per
100,000 population, it is less than 300 in the years, GILLANI et al.: Unemployment, Poverty,
Inflation and Crime Nexus 85, 1998-2005 but in the year 2007 the reported offences
increased to 340. Number of Crime per 100,000 population in Pakistan does not fully
indicate, the growth of the alarming increase in crime. The society, however, feels, alarmed
when the number of crime show increasing trend and hit the, headlines in the press daily and
the people start feeling concerned about their, safety and security.
Source: Pakistan Economic Survey (Various issues),
Bureau of Police Research and Development, Islamabad
Nadeem, Azhar Hassan (2002), Pakistan: The Political Economy of, Lawlessness. Karachi: Oxford
University Press.
Table 2
Population And Crime Growth In Pakistan

13. Position of United States and United Kingdom is 8th and 6th in terms of, world ranking on
the basis of crime per 100,000 population while Dominica, tops the list followed by New
Zealand, Finland and Denmark. Position of United States and United Kingdom is 8th and 6th
in terms of, world ranking on the basis of crime per 100,000 population while Dominica, tops
the list followed by New Zealand, Finland and Denmark. Contrary to, 86 Pakistan Economic
and Social Review, the general belief that Pakistan as a heaven for criminals, she is way
behind, at 57th position in the world. This situation could be partly attributed to a, large
number of unreported cases of crime, estimated at about 50% in the, west, where most of the
crime cases are reported/recorded in their criminal, records. However, even if this under
reporting is taken into account the, number of crime cases per 100,000 population will just
push up Pakistan’s, ranking by two or three positions only. India is, however, better off with,
average of 163 per 100,000 population as against 305 in Pakistan which is, 87% higher than
India.

14. CRIME SCENE IN PAKISTAN WITH TYPES
In Table 3, crimes reported in Pakistan by types from 1996-2007 are presented.
The total number of reported crime has gone up by about 63 percent, during the period 1996-
2007. A rapid growth is recorded in case of dacoity, robbery and cattle theft and the lowest
one is in case of murder/attempted, murder. The nature of crime committed indicates that the
increase in crime, committed was financially motivated.,
Table 3
Crimes reported by type

15. CONCLUSIONS
The results of the study reveal that the above mentioned economic factors have relationship
with crime. Therefore the study conclusions that unemployment causes crime. The reason is
that, unemployment rate in is a complementary indicator of income opportunities in the legal
labour market., Therefore, when, unemployment rate increases the opportunities for earning
income decreases which instigate, the individuals to commit crime. The costs of committing
crime go down for unemployed workers. The results of, causality support this proposition
that unemployment causes crime., The low income in relation to increase prices (inflation)
has crime instigating effect by reducing individual’s, moral threshold. This situation forces
people to boost their income for maintaining their existing living standards, by legitimate or
illegitimate means including criminal activities. In the light of the results of this study, the
following recommendations are suggested to prevent crime and reduce, crime rate.
These recommendations may help the government in formulation of policies that can be,
appropriate in curtailing the crime rate. It is therefore recommended that holistic effort should
be, made by governments at all levels to create jobs and arrest unemployment. government
instead of, employing foreigners, should sponsor her citizens abroad for studies in divert
fields of study. All the major, economic determinants of crime – unemployment, inequalities,
inflation etc. are needed to be adequately, addressed by the policy makers to check the crime
rate in the country.

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