Identifying the effect of unemployment on crime

In this paper, we analyze the relationship between unemployment and crime. Using U,S, state data, we estimate the effect of unemployment on the rates of seven felony offenses. We control extensively for state-level demographi c and economic factors and estimate specifications that include state-speci fic time trends, state effects, and year effects. In addition, we use prime defense contracts and a state-specific measure of exposure to oil shocks a s instruments for unemployment rates, We find significantly positive effect s of unemployment on property crime rates that are stable across model spec ifications. Our estimates suggest that a substantial portion of the decline in property crime rates during the 1990s is attributable to the decline in the unemployment rate. The evidence for violent crime is considerably weak er. However, a closer analysis of the violent crime of rape yields some evi dence that the employment prospects of males are weakly related to state ra pe rates.