Crime does pay (at least when it’s violent)!– On the compensating wage differentials of high regional crime levels

Nils Braakmann

No 91, Working Paper Series in Economics from University of Lüneburg, Institute of Economics

Abstract: This paper investigates whether high regional crime levels lead to a compensating wage differential paid by firms in the respective region. Using data from German social security records and official police statistics for 2003 to 2006, we consider both violent and non-violent crimes and use three-way error-components estimators to control for individual and regional heterogeneity. Our findings suggest a positive and rather large compensating differential for the risk of falling victim to a violent crime while no such effect exists for other criminal activities. However, our results also suggest that the wage effects for most individuals are rather small due to small variation in the crime rates.

Keywords: Compensating wage differentials; crime; three-way error-components model (search for similar items in EconPapers)
JEL-codes: J31 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2008-07-21
New Economics Papers: this item is included in nep-geo, nep-lab and nep-ure
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