An on-the-job search model of crime, inequality, and unemployment

Kenneth Burdett, Ricardo Lagos, Randall Wright

    Research output: Contribution to journalReview articlepeer-review

    Abstract

    We extend simple search models of crime, unemployment, and inequality to incorporate on-the-job search. This is valuable because, although simple models are useful, on-the-job search models are more interesting theoretically and more relevant empirically. We characterize the wage distribution, unemployment rate, and crime rate theoretically, and use quantitative methods to illustrate key results. For example, we find that increasing the unemployment insurance replacement rate from 53 to 65 percent increases unemployment and crime rates from 10 and 2.7 percent to 14 and 5.2 percent. We show multiple equilibria arise for some fairly reasonable parameters; in one case, unemployment can be 6 or 23 percent, and crime 0 or 10 percent, depending on the equilibrium.

    Original languageEnglish (US)
    Pages (from-to)681-706
    Number of pages26
    JournalInternational Economic Review
    Volume45
    Issue number3
    DOIs
    StatePublished - Aug 2004

    ASJC Scopus subject areas

    • Economics and Econometrics

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