eThesis - School of Business electronic theses

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The goal of this thesis is to study the relationship of income inequality and property crime rates in Finland. While theoretical expectations for the relationship are strong, empirical evidence from previous within-country studies is mixed.

My data set covers 337 Finnish municipalities during 1995-2009. The relationship of the Gini coefficient and crime rates was econometrically tested using an OLS model, a fixed effects panel data model and a dynamic generalized method of moments (GMM) model. The tests were conducted for property crimes in general, robbery, theft, embezzlement, fraud and violent crime.

I find income inequality to correlate positively with theft crimes. For other property crimes the evidence of a positive relationship is somewhat weaker. No correlation is found between income inequality and violent crime. Other factors determining differences in Finnish crime rates are those expected by existing literature: population density, unemployment rate and the proportion of foreigners in a population.

The results of my dynamic model support the hypothesis that criminal inertia is relevant in the study of determinants of crime. Static models may underestimate the effects of different regressors if their effect on crime rates is partly realized with a lag. Furthermore I find clear differences between crime types. On the basis of my work it seems clear that different types of crimes and their determinants should, whenever possible, be studied separately.