Regional Market Income Inequality and its Impact on Crime in Germany: A Spatial Panel Data Approach with Local Spillovers

Economic theory predicts a positive effect of an increase in income inequality on the prevalence of crime, but the international empirical evidence is mixed. For Germany, research on this topic is virtually non-existent. Therefore, I used fixed effect regressions to estimate the effect of a market income inequality proxy on property damages, thefts from motor vehicles, domestic burglaries and assaults in Germany. The models without spatial lags suggest economically small to moderate own-district elasticities between 0.13 and 0.95. The models with spatial lags generally show insignificant own-district estimates, but significant spatial spillovers.