The paper aims to study the effect of the unemployment rate and its volatility on crime in the USA. It proposes that not only the unemployment rate, but also its volatility affect the crime.
First, the volatility of the unemployment rate is calculated using ARCH models. Next, using the results from the first stage the ARDL approach to cointegration is used to examine the link between the unemployment rate and its volatility on the crime.
The cointegrated or long‐run relationships are found only for burglary and motor‐vehicle theft. The results indicate that the unemployment rate has a significant effect on burglary and motor‐vehicle theft only in the short run and the unemployment volatility has a negative effect on motor‐vehicle theft regardless of time span. However, it has a positive effect on burglary in the short run and no effect in the long run.
The effect of unemployment rate on crime is documented in the literature. However, to the best of our knowledge, this is the first paper that emphasizes the importance of unemployment rate volatility on the crime.
