The econometrics of crime

According to classical economic theory of criminality, an increase in the expected punishment (i.e. the result of combining the likelihood of punishment and the amount of punishment) should lead to a reduction in crime. In an empirical analysis, a test of this plausible hypothesis is extremely complex. "Criminality" is broken down in a large number of crimes and the operationalisation of "likelihood of punishment" in a system of law involves the actions and decisions of a large number of institutions - police, prosecution, courts - and varies in the numbers of solved crimes and the rates of charges and sentencing as well as in decisions on fines, custody and probation or juvenile punishment. Usually in empirical crime research only a small portion of these factors are examined simultaneously. Prof. Horst Entorf, Technical University of Darmstadt, and Hannes Spengler, DIW, Berlin and TU Darmstadt, have constructed a comprehensive database, with crime and prosecution statistics for 1977-2001. In this article the use of the database and a econometric panel study of the effect of the German criminal prosecution system and the crime rates in the six most important crime categories are presented. The results give clear evidence for the effectiveness of deterrents and hence an empirical confirmation of the economic theory of criminality.