Economic crime and business cycles in Taiwan

Abstract

This paper analyzes economic crimes both theoretically and empirically. Theoretically, an individual utility function is adopted in the beginning. The variables of real police expenditures and economic environment, such as the business cycle, are considered. The directions of influence of these variables on economic crime are dependent upon the risk attitudes of potential criminals. Empirically, time‐series data are adopted from 1966 to 1989 and average economic crime per capita is taken as a dependent variable. The conclusions are as follows: the unemployment rate has a significantly positive effect (a higher unemployment rate results in a higher crime rate), the business cycle has a significantly negative effect (a rising business cycle results in a lower crime rate), police expenditures have an insignificantly negative effect; and real income per capita has an insignificantly positive effect. In general, potential criminals have the tendency of risk‐neutrality or risk‐preference.