We would like to thank Cynthia Bansak and Lorien Rice for several helpful suggestions. We thank Lawrence Katz, Mark Hooker, Carlisle Moody, and Christopher Ruhm for providing us with state level data. This research was supported by a grant from the Austrian FFF, grant P II962-SOZ. AbstractPrevious estimates of the effect of unemployment on crime commonly omit determinants of criminal behavior that vary with the business cycle, creating correlation between unemployment rates and the residuals in aggregate crime regressions. In this paper, we employ several strategies that attempt to minimize or break this correlation and eliminate the accompanying omitted variables bias to estimates of the effect of unemployment on crime. Using a state-level panel for the period from 1970 to 1993, we explore the sensitivity of crime-unemployment elasticity estimates to explicit controls for per-capita alcohol consumption, a factor that has been shown in the past to be pro-cyclical and a partial determinant of criminal behavior. In addition, we use prime defense contracts per-capita at the state level as an instrument for state unemployment rates. Both controlling for alcohol consumption and using instrumental variables to correct for omitted variables bias yields large effects of unemployment on the seven felony offenses recorded by the Department of Justice. Moreover, in contrast to previous research, we find significant and sizable positive effects of unemployment on the rates of specific violent, as well as property crimes. JEL Codes: J6, K42Keywords: Unemployment, Crime 1 The existence of a positive significant unemployment effect varies considerably by offense, ranging from 12 and 16 percent of the studies summarized for assault and murder to 47 and 52 percent for larceny and burglary. Entorf and Spengler (1998) using a state panel for Germany also find ambiguous unemployment effects. Studies using microdata, however, generally find a high association between joblessness and criminal activity (Freeman, 1996). Moreover, the demographic composition of convicted offenders consists disproportionally of persons who would command low legitimate wages: for example, the young and relatively less educated (Grogger, 1997).

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This paper reviews trends in housing affordability in the U.S. over the past four decades. There is little evidence that owner-occupied housing has become less affordable. In contrast, there have been modest increases in the fraction of income that the median renter household devotes to housing. We find pronounced increases in the rent burdens for poor households. We explore the low-income rental market in more detail, analyzing the relative importance of changes in the income distribution, in housing quality, land use regulation, and zoning in affecting rent burdens. We also sketch out some policies that might improve housing affordability.

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