The effect of inequality on crime

A rational choice (economic) model of crime would suggest that higher inequality leads to more property crime. This is because, as the disparity between the rich and poor increases, the poor have more incentive to commit property crime, because there is more to gain from such crime, and the opportunity cost of committing crime is lower for the poor than for the rich. Now, this model is easily criticised as unrealistic, as even the relatively wealthy may commit crimes that have an economic motive (Bernie Madoff being the obvious example). The model also doesn't do a good job of explaining violent and other crimes that do not have an obvious economic motive.

Criminologists have a different view of the relationship between inequality and crime. One criminological theory that may be used to explain the relationship is social disorganisation theory. This theory suggests that higher inequality reduces social cohesion, which in turn increases crime - not just property crime, but crime more generally.

Given how easy it is to criticise the economic model of crime, I was interested to read this new article by Matteo Pazzona (Brunel University London), published in the journal World Development (open access). Pazzona conducts a meta-analysis of studies of the relationship between inequality and crime, limiting the analysis to empirical studies in the economics literature (more on that point later). They identified 43 studies, with 1341 estimates of the relationship between inequality and crime (it is not unusual for a study to report multiple estimates, with different covariates and spread across main results and robustness checks). Meta-analysis provides a method of combining those results to estimate an overall effect. In this case, Pazzona finds that:

Firstly, the true values of the partial correlation coefficients – net of publication bias – are statistically but not economically significant. They are in the range 0.007–0.123, which represents non-existent or small effects, according to the guidelines provided by Doucouliagos (2011). Secondly, I also find some limited evidence of positive publication bias (preference for positive results), but its presence is limited.

So, Pazzona concludes at that point in the paper that there is basically no effect of inequality on crime. However, the Doucouliagos paper that he cites says that effects between 0.070 and 0.173 represent a 'small effect', and three of the six point estimates in Pazzona's preferred model fit within this range. So, perhaps there is a small effect of inequality on crime. Which, to be fair to Pazzona, is what he concludes by the end of the paper:

It is safe to say that, if inequality affects crime, its effect is – at best – small.

However, this is clearly not the last word on this topic. Pazzona limits the analysis to include only studies published in the economics literature. That leaves out many studies within the criminological or sociological literature (and possibly other literatures as well). As he notes, three past meta-analyses conducted by criminologists:

...found correlation coefficients higher than the ones found in this research and no evidence of publication bias.

So, that suggests that leaving the criminological literature out of this meta-analysis probably biases the overall effect downwards. Pazzona gives only a very weak rationale for ignoring the studies outside of economics:

By focusing exclusively on economics, I can also limit the large differences in theoretical and methodological approaches with other sciences.

Yes, but at a cost of probably biasing the estimates. We could try to argue that economics has a larger publication bias problem than many other fields (see here), and so the small effect of inequality on crime from the economics literature overall might even over-estimate the true effect. However, Pazzona has very carefully controlled for publication bias in the meta-analysis, 

Coming back to the choice to limit the analysis to economics studies alone, this was an especially inexplicable choice, given that in subsequent analysis in the paper, Pazzona controls for a variety of features of the studies. That analysis could have dealt with the range of methodological approaches that were applied, and actually been helpful in understanding the differences between the findings in the economics literature and those in criminology. In that heterogeneity analysis, Pazzona found that, when looking at the type of crime that was analysed across the 43 studies:

...the coefficient for Property crime is negative and relatively small... The lack of a positive and statistically significant impact on property crime categories implies that inequality does not primarily influence economically motivated criminal behaviour as predicted by the rational choice model.

Score another one against the economists, since the economic model of crime suggests that the effects of inequality on crime should be largest for property crime. How the variables are measured matters, with studies that use crime victimisation survey data reporting larger estimates than those using police data, and using a measure of inequality that is more sensitive to income differences at the bottom of the distribution also increases the estimated relationship with crime. On the latter point, Pazzona notes that:

This provides some evidence that crime incentives are the highest when criminal payoff increases, rather than when the opportunity cost decreases.

I guess, if you believe the economic model of crime, which the other results might give us reason not to. The other variables that are included in a model matter too. Including unemployment and a measure of police deterrence increases the observed effect, while including measures of income or poverty decrease the observed effect. Cross-sectional studies also seem to inflate the observed effect. These results are important, as they show the consequences of methodological choices in the analysis (and, as per my point above, could have helped us understand the differences with the criminology literature).

Overall, this paper is a good case study of how to conduct and report a meta-analysis (and for that reason I have shared it with one of my PhD students who is doing a meta-analysis in quite a different research area). However, the choice to exclude non-economics literature from the analysis leaves the key research question of the relationship between inequality and crime incompletely answered. Clearly, there is more work to do in this area.