Income inequality and crime in Europe : a panel data analysis

Abstract

The global issues of income inequality and crime have been subject to intense research over recent decades. Although theoretically established, empirical studies investigating whether increases in crime can be attributed to rising income inequality have generally reported mixed results. Thus, the main purpose of this dissertation is to investigate the relationship between income inequality and crime for a set of developed economies. More specifically, this dissertation studies the relationship between the Gini coefficient and three crime types, namely, homicide, robbery and domestic burglary; reflecting violent crime and property crime respectively. In doing so, panel data analysis, using the Fixed Effects Model, is employed for a sample of 27 European countries over the period 2005-2018. The study includes a set of eleven control variables, comprising three economic variables, three demographic variables, two variables capturing law enforcement and three social capital indicators. When controlling for these factors, the results confirm the hypothesised, positive relationship between property crime and income inequality, as increases in the Gini coefficient are linked with strong increases in the rate of domestic burglaries. On the other hand, income inequality is found to have no significant correlation with homicide and robbery, suggesting that income inequality is solely related to crime that is economically motivated. For violent crime, social capital indicators and education are better determinants, while property crime that is inflicted with violence is heavily influenced by economic progress, population density and education. These findings are robust to three alternative measures of income inequality and to the inclusion of time-specific fixed effects. The results of this dissertation carry important implications from a policymaker’s perspective. Most importantly, prioritising an equitable income distribution can effectively mitigate property crime in Europe. In addition, educational policies, expenditure allocated towards welfare spending and improving economic conditions serve as other promising policy measures for crime prevention.