45 J.L. & Econ. 1 (2002)
Inequality and Violent Crime

handle is hein.journals/jlecono45 and id is 7 raw text is: INEQUALITY AND VIOLENT CRIME*
PABLO FAJNZYLBER,       DANIEL LEDERMAN,
University of Minas Gerais    World Bank
and
NORMAN LOA YZA
World Bank
ABSTRACT
We investigate the robustness and causality of the link between income inequality
and violent crime across countries. First, we study the correlation between the Gini
index and homicide and robbery rates within and between countries. Second, we
examine the partial correlation by considering other crime determinants. Third, we
control for the endogeneity of inequality by isolating its exogenous impact on these
crime rates. Fourth, we control for measurement error in crime rates by modeling it
as both unobserved country effects and random noise. Finally, we examine the ro-
bustness of this partial correlation to alternative measures of inequality. The panel
data consist of nonoverlapping 5-year averages for 39 countries during 1965-95 for
homicides and 37 countries during 1970-94 for robberies. Crime rates and inequality
are positively correlated within countries and, particularly, between countries, and
this correlation reflects causation from inequality to crime rates, even after controlling
for other crime determinants.
I. INTRODUCTION
THE relationship between income inequality and the incidence of crime
has been an important subject of study since the early stages of the economics
literature on crime. According to Gary Becker's analytical framework, crime
rates depend on the risks and penalties associated with apprehension and also
on the difference between the potential gains from crime and the associated
* We are grateful for comments and suggestions from Franqois Bourguignon, Dante Con-
treras, Francisco Ferreira, Edward Glaeser, Sam Peltzman, Debraj Ray, Luis Servdn, and an
anonymous referee. Norman Loayza worked at the research group of the Central Bank of Chile
during the preparation of the paper. This study was sponsored by the Latin American Regional
Studies Program of the World Bank. The opinions and conclusions expressed here are those
of the authors and do not necessarily represent the views of the institutions with which they
are affiliated.
[Journal of Law and Economics, vol. XLV (April 2002)]
0 2002 by The University of Chicago. All rights reserved. 0022-2186/2002/4501-0001$01.50

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