Link between unemployment and crime in the US: A Markov-Switching approach

• We examine link between unemployment and property crimes in the US.
• Relationship is positive but insignificant for burglary, larceny, and robbery.
• More motor-vehicle thefts occur during economic expansions relative to contractions.
• During recession, links between unemployment and property crimes are much weaker.
• During 1990–2004, robbery and unemployment are significantly procyclical.

This study has two goals. The first is to use Markov Switching models to identify and analyze the cycles in the unemployment rate and four different types of property-related criminal activities in the US. The second is to apply the nonparametric concordance index of Harding and Pagan (2006) to determine the correlation between the cycles of unemployment rate and property crimes. Findings show that there is a positive but insignificant relationship between the unemployment rate, burglary, larceny, and robbery. However, the unemployment rate has a significant and negative (i.e., a counter-cyclical) relationship with motor-vehicle theft. Therefore, more motor-vehicle thefts occur during economic expansions relative to contractions. Next, we divide the sample into three different subsamples to examine the consistency of the findings. The results show that the co-movements between the unemployment rate and property crimes during recession periods are much weaker, when compared with that of the normal periods of the US economy.