The World Bank has published the study 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.
The terms exogenous and endogenous appear throughout the paper. The Statistics How To web site has an explanation of the terms.
An exogenous variable is a variable that is not affected by other variables in the system. For example, take a simple causal system like farming. Variables like weather, farmer skill, pests, and availability of seed are all exogenous to crop production. Exogenous comes from the Greek Exo, meaning “outside” and gignomai, meaning “to produce.” In contrast, an endogenous variable is one that is influenced by other factors in the system. In this example, flower growth is affected by sunlight and is therefore endogenous.
In the conclusion to the World Bank paper, they provide a cautionary note to keep in mind about the results.
The first shortcoming of the paper leads to the second, which is that we have not identified the mechanisms through which more pronounced inequality leads to more crime. Uncertainty about these mechanisms raises a variety of questions with important policy implications. For instance, should police and justice protection be redirected to the poorest segments of society? How important for crime prevention are income-transfer programs in times of economic recession? To what extent should public authorities be concerned with income and ethnic polarization? Do policies that promote the participation in communal organizations and help develop “social capital” among the poor also reduce crime? Hopefully, this paper will help stir an interest in these and related questions on the prevention of crime and violence.