1 Crime and Local Inequality in South Africa Gabriel Demombynes and Berk zler Abstract We examine the effects of local inequality on property and violent crime in South Africa The findings are consistent with economic theories relating inequality to property crime and also with sociological theories that imply that inequality leads to crime in general Burglary rates are 20 30 higher in police station jurisdictions that are the wealthiest among their neighbors suggesting that criminals travel to neighborhoods where the expected returns from burglary are highest Finally we do not find evidence that inequality between racial groups fosters interpersonal conflict at the local level Key Words Crime inequality South Africa JEL Classification Numbers D63 D74 R12 World Bank Policy Research Working Paper 2925 November 2002 The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues An objective of the series is to get the findings out quickly even if the presentations are less than fully polished The papers carry the names of the authors and should be cited accordingly The findings interpretations and conclusions expressed in this paper are entirely those of the authors They do not necessarily represent the view of the World Bank its Executive Directors or the countries they represent Policy Research Working Papers are available online at http econ worldbank org University of California Berkeley and The World Bank respectively The authors would like to thank Statistics South Africa and Dr Anne Letsebe from the Office of the President with help in the generation of our data set We are grateful to Jere Behrman Eliana La Ferrara Peter Lanjouw Misha Lokshin and Martin Ravallion for comments on previous drafts of this paper Correspondence gabriel demog berkeley edu and bozler worldbank org 2 I Introduction Crime is among the most difficult of the many challenges facing South Africa in the post apartheid era The country s crime rates are among the highest in the world and no South African is insulated from its effects Beyond the pain and loss suffered by crime victims crime also has less direct costs The threat of crime diverts resources to protection efforts exacts health costs through increased stress and generally creates an environment unconducive to productive activity Additionally the widespread emigration of South African professionals in recent years is attributable in part to their desire to escape a high crime environment 1 All of these effects are likely to discourage investment and stifle long term growth in South Africa Consequently it is important to understand the factors that contribute to crime Both economic and sociological theory has linked the distribution of welfare to criminal activity Economists have suggested that inequality may capture the differential returns to criminal activity and thereby have an association with crime rates If criminals travel not only the welfare distribution in the local area but that of neighboring areas as well may be linked to local crime levels Sociologists have hypothesized that inequality and social welfare in general may have effects on crime through other channels Inequality may be associated with lack of social capital lack of upward mobility or social disorganization all of which may cause higher levels of crime Furthermore 1 According to a survey conducted by the South African Migration Project blacks and whites both rated security and safety as the most significant push factor reinforcing the national importance of addressing the crime problem as a deterrent to the brain drain Dodson 2002 3 economic inequalities between groups may engender conflict in a society by consolidating and reinforcing ethnic and class differences Blau Blau 1982 In this paper using data on crime and estimates of welfare measures by police station jurisdiction in South Africa we consider three questions First we examine the extent to which economic versus sociological theories explain the variation in crime rates by comparing the implications of various theories for violent crime and property crime separately Next we consider how the relative position of a community among neighboring areas may be associated with crime Finally we examine whether crime is particularly prevalent in areas with high inequality between racial groups The next section discusses the reasons why there might be an association between economic welfare and crime at the community level Section III summarizes the empirical literature on inequality and crime and explains the contribution of this paper Section IV briefly outlines the empirical approach and describes our data sources Section V presents the regression results for various types of crime and Section VI concludes II Crime and Economic Welfare There are a number of reasons why the local distribution of economic welfare might be associated with the prevalence of crime Various arguments have been made by economists sociologists and public health specialists First community welfare measures may be associated with crime levels via a relationship with the returns from crime and non crime activities In his seminal work Becker 1968 proposes an occupational choice model in which the incentives for 4 individuals to commit crime are determined by the differential returns from legitimate and illegitimate pursuits At an aggregate level researchers have suggested various approaches to approximate these returns For example Machin and Meghir 2000 argue that criminals are more likely to come from the bottom end of the wage distribution and they measure the returns to legitimate activities with the 25th percentile wage Ehrlich 1973 postulates that the payoffs to activities such as robbery burglary and theft depend on the level of transferable assets and can be proxied by median income in the community Under certain conditions a Becker type economic model can generate a relationship between property crime and local inequality Suppose for example that the expected returns from illegitimate activities are determined by the mean income of households in the community Also suppose that the returns from crime for potential criminals are equal to the incomes of those at the lower end of the local income distribution Then the relative benefits of crime will be determined by the spread between the community mean and the incomes of the relatively poor This implies that the