Immigration and crime in frictional labor markets

Abstract

This paper studies the relationship between immigration and crime by applying the Engelhardt et al. (2008) crime model. Although the relationship between immigration and crime has been widely debated, there is no theoretical explanation that can define the impact of immigration on crime. This model constructs two channels through which immigrants affect the host country's crime rate: composition (direct) channel and labor market (indirect) channel. These two channels provide explanations for the ambiguity of immigration effects on crime rates. An extension of the model with skill bias and imperfect substitution between skilled and unskilled labor has more sophisticated numerical results based on the United States (U.S.) labor market and immigration. A more generous unemployment insurance system for immigrants increases both the unemployment and crime rates. An extended period of incarceration and a deportation policy reduce crime rates but have no significant impact on labor market outcomes.