Template-Type: ReDIF-Paper 1.0
Author-Name: King Yoong Lim
Author-Name-First: King Yoong
Author-Name-Last: Lim
Author-Name: Pengfei Jia
Author-Name-First: Pengfei
Author-Name-Last: Jia
Author-Name: Ali Raza
Author-Name-First: Ali
Author-Name-Last: Raza
Title: Crime, Human Capital, and the Impact of Different Taxation
Abstract: This paper presents a macroeconomic model with crime, human capital, and three taxation policies (consumption, labour, and capital income taxes). In an extension, we endogenize the probability of escaping punishment to depend on government expenditure on public security/police. The model is solved analytically and numerically to derive propositions, which are then verified empirically using cross-country data. Compared to the literature, we find a much higher threshold probability. Above the threshold, the equilibrium crime rate is positively related to the escape probability. In addition, above this threshold level, a rise in capital income tax or a decline in labour income tax would lead to a higher equilibrium crime rate, if the taxes are modelled using marginal tax rates. There also appears to be empirical supports where the equilibrium human capital level depends positively on consumption tax. Lastly, when the probability is endogenized, there also exists a threshold level for the spending on public security/police, above which consumption tax and capital income tax have positive e¤ects on the equilibrium level of human capital.
Creation-Date: 2018
File-URL: http://www.lancaster.ac.uk/media/lancaster-university/content-assets/documents/lums/economics/working-papers/LancasterWP2018_001.pdf
File-Format: application/pdf
Number: 220851234
Classification-JEL: H20, H59, K42, O41
Keywords: Apprehension risk, Crime, Human Capital, Police Spending, Taxation
Handle: RePEc:lan:wpaper:220851234