Inequality, crime and private protection

Abstract

There is a consensus that inequality increases the supply of crime. As disparity in income grows within a society, the incentives for low-income individuals to engage in criminal activities also increase. However, in a context of high inequality, better-off individuals invest in deterring those who want to appropriate their resources. We examine this twofold effect of inequality in an equilibrium model of crime and private protection. We show that inequality unambiguously increases investment in private protection, but the relationship between inequality and crime is ambiguous, depending on how protection responds to private investment.