Modelling crime and punishment

This paper provides an extended supply of labour model which allows for dif ferent intensities of legal and illegal (criminal) activities and in which criminal activities may be considered both as work and leisure. Heterogenei ty of individuals is also taken into account. The model is estimated from F innish aggregate time-series data, pooled Finnish municipalities data and p ooled international cross-country data. With the Finnish aggregate data, a volume index of crime is constructed and then used in testing the model. Al l empirical results give strong support to the hypothesis that apprehension and punishment are important deterrents of crime. By contrast, the role of sosioeconomic and demographic variables turns out to be of little importan ce.