An Empirical Investigation of Labor Market Conditions and Crime Rates in Indonesia

This study aims to pinpoint trends in crime rates in Indonesia and how these correlate with labor market opportunities from 2005-2014, with the unemployment rate and minimum wages as the key determinants. This thesis uses an empirical approach, involving 31 provinces over a 10-year period. The data show that the number of crimes in Indonesia has fluctuated, with crime rates at their highest in 2011. Employing a panel-data estimation using ordinary least square (OLS) estimation with time and province-level fixed effects, the regressions indicate that the unemployment rate does not correlate with crime rates. Meanwhile, a minimum wage does give a meaningful result and is consistent across the model. Therefore, crime trends in Indonesia are related to the minimum wages. Ultimately, all other economics determinants of crime do not seem to have any relationship with crime rates.