Crime, Inequality, and Unemployment.

There is much work on the relationships between crime, unemployment and inequality. At the turn of the millennium, 2.1 million people in the U.S. were in prison or jail, rising to 6.3 million if we include those on probation or parole. A key finding is that introducing criminal activity into otherwise standard models of the labor market can significantly affect the predictions of these models. The first section of this paper presents the worker's problem taking wages as given. This provides a natural extension to the textbook job search model to incorporate crime. Section II analyzes wage setting. This shows how various types of equilibria with different crime rates can arise for different parameter values, and how sometimes multiple equilibria coexist, with different amounts of crime, inequality and unemployment. This paper has developed a search equilibrium framework that can be used to analyze the interrelations between crime, unemployment and inequality. The model is essential to analyze feedbacks that can lead to multiplicity.