More police, less crime: Evidence from US state data

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 begin by exploring the structure of the financial relationship existing between state and local governments, arguing that variations in state tax rates can serve as an instrumental variable for local police numbers. Two-stage least square (2SLS) result show that the elasticity of police presence with respect to crime is about -1.1 for violent crime, and -0.9 for property crime. These results are mostly significant, and are more negative than those obtained under OLS. Overall, our estimations suggest that police does reduce crime. (C) 2008 Elsevier Inc. All rights reserved.