"More Police, Less Crime, Evidence from State Data", with minor revision, International Review of Law and Economics, (SSCI)

Economic theory suggests police and crime are negatively correlated. However, it is surprisingly difficult to demonstrate this relation empirically, as areas with greater numbers of crimes tend to hire more police. In order to resolve this simultaneity, we use the structure of the financial relationship existing between state and local governments as an instrumental variable for local police numbers, and two-stage least square result show that the elasticity of police presence with respect to crime is about ?1. From the policy perspective of crime prevention, this number can serve as a criterion for the cost-benefit analysis when government intends to fight crime by hiring more police.