Unemployment and Crime.

In this paper, I investigate the influence of unemployment on crime by using data on Europe over the time period 1995-2012. I look at the impact of total unemployment, youth unemployment and long term unemployment on various types of crimes. I conduct a fixed-effect estimation where country and time specific effect and various factors are controlled for. The estimation is done with both ordinary least square (OLS) estimation and two stage least square (2SLS) estimation where employment protection legislation is used to instrument unemployment. The OLS estimation suggest that higher youth unemployment rate leads to more burglaries. However, drug offence is significantly affected by all three unemployment rates. When using 2SLS estimation I find that higher unemployment rate leads to more property crimes (burglary and motor vehicle theft) but less violent crimes regardless of which of the three unemployment rates is used.