The link between the adjusted misery index and crime in the Philippines
Date
2023-03
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Abstract
This study analyzes the relationship between the adjusted misery index and crime rate
in the Philippines from 1978 to 2008. The adjusted misery index is an extension of
Okun’s [1970] original indicator, which combined inflation and unemployment rate to
measure general economic well-being. In this study, we add underemployment rate to
the original misery index to more accurately capture the labor market conditions in the
country. We adopt the Cantor-Land [1985] model to determine the relationship
between the misery index and crime rate. According to the model, macroeconomic
conditions affect crime via two contrasting effects: the motivational and opportunity
effects. Worsening economic conditions may motivate more individuals to commit
crime to maintain their standard of living. In contrast, the opportunity effect argues that
unemployed individuals spend more time at home, which reduces their vulnerability to
commit crime or be victims of crime.
We use Johansen cointegration analysis and the vector error correction model (VECM)
to identify the short-run and long-run dynamics between the adjusted misery index and
crime rate in the Philippines. Our results suggest both short-run and long-run causal
links from the adjusted misery index to crime. In particular, the adjusted misery index
has a positive effect on crime rate in the Philippines, suggesting a stronger motivational
than opportunity effect. The policy implication is non-trivial: if macroeconomic
performance is a significant determinant of crime rates, then improving
macroeconomic conditions may be used to reduce criminal activities in the country.
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Keywords
adjusted misery index, crime rate, Vector error corrector model, opportunity effect