Inequality and violent crime

We investigate the robustness and causality of the link between income inequality and violent crime across countries. First, we study the correlation between the Gini index and homicide and robbery rates within and between countries. Second, we examine the partial correlation by considering other crime determinants. Third, we control for the endogeneity of inequality by isolating its exogenous impact on these crime rates. Fourth, we control for measurement error in crime rates by modeling it as both unobserved country effects and random noise. Finally, we examine the robustness of this partial correlation to alternative measures of inequality. The panel data consist of nonoverlapping 5-year averages for 39 countries during 1965-95 for homicides and 37 countries during 1970-94 for robberies. Crime rates and inequality are positively correlated within countries and, particularly, between countries, and this correlation reflects causation from inequality to crime rates, even after controlling for other crime determinants.