Handbook on the Economics of Crime
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Handbook on the Economics of Crime

Edited by Bruce L. Benson and Paul R. Zimmerman

While few economists analyzed criminal behaviour and the criminal justice process before Gary Becker’s seminal 1968 paper, an enormous body of economic research on crime has since been produced. This insightful and comprehensive Handbook reviews and extends much of this important resulting research.
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Chapter 6: Police, Prisons, and Punishment: The Empirical Evidence on Crime Deterrence

Jonathan Klick and Alexander Tabarrok


1 Jonathan Klick and Alexander Tabarrok INTRODUCTION Spending on the criminal justice system in the USA is enormous. In 2007, spending on police and prisons amounted to more than $175 billion. In terms of local public finance, expenditures in these areas trailed only education and healthcare, according to estimates by the US Census Bureau. Additionally, the direct and indirect costs of crime may amount to a total annual burden that exceeds $1 trillion (Anderson, 1999). Considering the recent decline in state and local revenue, understanding the determinants of crime and quantifying their effects are important tasks for empirical researchers simply because the public policy implications are huge. Over the last two decades, economists, using the tools of modern microeconometrics, have provided a number of insights into the factors that affect crime rates. Although there have certainly been a number of missteps over this period, innovative econometric identification strategies, combined with a host of new data sets, have provided a fresh understanding of what factors are important in explaining variation in crime both crosssectionally and over time. In this chapter, we review the best recent attempts to evaluate the deterrence effects of police and prisons on crime. Although work on the effects of capital punishment and gun laws has received substantial, perhaps disproportionate, attention in crime discussions in both the academic community and general public, researchers have more consistently shown that increases in police and prisons reduce crime. In fact, results from many studies suggest that spending in these areas may...

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