Impacts of Economic Development and Stability on Crime: Country Level Panel Data Analysis

Abstract

This research paper examines the dynamics between economic development, financial stability, and crime rates across various countries. Rooted from the economic theory of crime and institutional anomie theory, this study uses a robust panel data analysis covering numerous countries to explore how economic metrics such as GNI per capita, foreign direct investment inflows, and financial institution strength relate to crime perceptions. The empirical analysis, using GLS, fixed effects, and random effects models along with a series of robustness checks, confirms significant relationships between these economic factors and crime levels. Preliminary results indicate that while economic fitness can occasionally spur increases in crime rates, possibly due to concentration of people, stronger financial institutions and a more stable government generally contribute to reductions in crime. This paper contributes to the ongoing discussion on crime economics by improving our understanding of the economic causes of crime and showing how changes in certain factors can reduce crime through economic strategies.