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Market Wages and Youth Crime

University of California, Los Angeles, and National Bureau of Economic Research

To study the problem of widespread youth crime, I analyze a time‐allocation model in which consumers face parametric wages and diminishing marginal returns to crime. The theory motivates an econometric model that I estimate using data from the National Longitudinal Survey of Youth. My estimates suggest that youth behavior is responsive to price incentives and that falling real wages may have been an important determinant of rising youth crime during the 1970s and 1980s. Moreover, wage differentials explain a substantial component of both the racial differential in criminal participation and the age distribution of crime.