What Part of the Income Distribution does Matter for Explaining Crime? The Case of Columbia

Economic theory suggests that inequality should influence crime positively. Yet, the evidence in favor of that hypothesis is weak. Pure cross-sectional analyses show significant positive effects but cannot control for fixed effects. Time series and panel data point to a variety of results, but few turn out being significant. The hypothesis maintained in this paper is that it is a specific part of the distribution, rather than the overall distribution as summarized by conventional inequality measures, that is most likely to influence the rate of (property) crime in a given society. Using a simple theoretical model and panel data in 7 Colombian cities over a 15 year period, a structural model is proposed that permits identifying the precise segment of the population whose relative income best explains time changes in crime.

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