Economic Policy

Abstract

Contrary to common perceptions, today both property and violent crimes (with the exception of homicides) are more widespread in Europe than in the United States, while the opposite was true thirty years ago. We label this fact as the ‘reversal of misfortunes’. We investigate what accounts for the reversal by studying the causal impact of demographic changes, incarceration, abortion, unemployment and immigration on crime. For this we use time series data (1970–2008) from seven European countries and the United States. We find that the demographic structure of the population and the incarceration rate are important determinants of crime. Our results suggest that a tougher incarceration policy may be an effective way to contrast crime in Europe. Our analysis does not provide information on how incarceration policy should be made tougher nor does it provide an answer to the question whether such a policy would also be efficient from a cost-benefit point of view. We leave this to future research.

— Paolo Buonanno, Francesco Drago, Roberto Galbiati and Giulio Zanella