Machin, Stephen, and Costas Meghir. 2004. "Crime and Economic Incentives." Journal of Human Resources 39(4): 958-979.

We explore the role that economic incentives, particularly changes in wages at the bottom end of the wage distribution, play in determining crime rates. We use data on the police force areas of England and Wales between 1975 and 1996 and find (relative) falls in the wages of low-wage workers lead to increases in crime. We carry out a number of experiments with different wage measures, including a wage measure that accounts for the effects of changes in the composition of employment. These reinforce the picture of a strong association between the low-wage labor market and crime. The result that incentives play a central role is reinforced further by the strong impact on crime of deterrence measures and of a measure of the returns to crime.

Stephen Machin is a professor of economics at the University College London, Institute for Fiscal Studies, and at the Centre for Economic Performance, London School of Economics. Costas Meghir is a professor of economics at the University College London, Institute for Fiscal Studies, and at the CEPR. The authors thank two anonymous referees, Gary Becker, Jeff Grogger, Richard Harries, Steve Levitt, Casey Mulligan, Steve Raphael, Rudolf Winter-Ebmer, and participants in the 1999 American Economic Association meeting in New York, the 1999 American Society of Criminologists meeting in Toronto, and the 2000 British Society of Criminology conference in Leicester for useful and constructive comments. They also would like to thank Steve Gibbons, Ben Klemens, and Lupin Rahman for excellent research assistance