"Does Unemployment Increase Crime? Evidence from US State Data 1974-2000", Journal of Human Resources, (SSCI)

To solve the endogeneity problem, we use changes in the real exchange rate, state manufacturing sector percentage and state union membership rates as novel instrumental variables to estimate the effect of unemployment on crime. We find a 1 percentage point increase in unemployment would increase property crime by 4 percent under 2SLS. But unemployment has no significant effect on violent crime. The effect has significant policy implications since it explains 30 percent of the property crime change in US during the 1990s. This number can also serve as a criterion for the cost-benefit analysis when government intends to fight crime by reducing unemployment rate.