Not all Inequalities are Made Equal: Risk Aversion and the Heterogeneous Impacts of Income Inequality on Crime
Extensive research has attempted to identify the impact of income inequality on crime, but none consider how this relationship is moderated by risk tolerance. Using 2019 district level data from Malaysia, the present study addresses this gap by accounting for the interaction effect between risk aversion and income inequality, which is found to be a positive and robustly significant cause of overall crime. This study finds that income inequality has a robust, significant, and positive impact on property crime. In contrast, by generating constant relative risk aversion estimates from district characteristics, violent crime is shown to be better explained by risk aversion alone. These are obtained through the use of 2SLS regressions with counterfactual (local dynamics independent) inequality as an instrument for income inequality, thus accounting for reverse causality between income inequality and crime. This study’s contribution to the literature is four-fold. Firstly, I contribute to expanding research on income inequality and crime beyond the US and Europe. Secondly, these findings crucially help to reconcile empirics with discrepancies between the implications of various theories of crime on inequality. Thirdly they rationalize the heterogeneity in estimated income inequality effects throughout the literature. And fourthly, from a policy perspective, my findings suggest that income inequality reduction should be prioritized in the most risk averse regions to maximize crime reduction, especially as income inequality reduction in risk averse regions may have an insignificant or positive impact on crime.
Date:
2 November 2023, 15:00 (Thursday, 4th week, Michaelmas 2023)
Venue:
Manor Road Building, Manor Road OX1 3UQ
Venue Details:
Skills Lab or https://zoom.us/j/97316381707?pwd=WDdBVlJVVU1Ga3JnRW15c0RnNlE5QT09
Speaker:
Gurubharan Ganeson (University of Oxford)
Organising department:
Department of Economics
Part of:
Novel Ideas: MPhil Seminar Series
Booking required?:
Not required
Audience:
Members of the University only
Editor:
Shreyasi Banerjee
