Estimating Deterrence Effects: A Public Choice Perspective on the Economics of Crime Literature

Abstract

Following Becker's path-breaking theoretical work on the economics of crime, a large econometric literature has developed to test his implications [3]. This literature typically focuses on a supply of offenses in which per capita crimes are related to the probability and severity of punishment for that type of crime, the expected income from the criminal activity, returns from alternative legal activities, and other socio-economic factors. However, the economic theory of crime also implies that the supply of offenses is determined simultaneously with community's demand for enforcement services [24; 25]. Theoretically, the crime rate depends on police deterrence efforts, police deterrence efforts depend upon the level of police resources, and the level of police resources depends on the crime rate. As a result, the typical econometric model employees data on reported crimes (Index I crimes) and a simultaneous equation estimating technique with at least two, and generally three (or more) equations in which police deterrence efforts are proxied by the probability of arrest [14].1 A series of recent empirical studies of the economics of crime