Does the crime rate respond symmetrically or asymmetrically to changes in governance quality and macroeconomic variables? The application of linear and non-linear ARDL

Abstract

PurposeSocioeconomic development needs quality governance to provide and protect property rights and other economic means. In this regard, the current study examines the symmetric and asymmetric effect of composite governance index, unemployment rate (UR) and consumer price index on the crime rate (CR) in Pakistan.Design/methodology/approachThe current study uses time series data (1996–2020) on CR, composite governance index, UR and consumer price index. In this study, the authors first constructed a composite governance index from six governance indicators using the principal component analysis (PCA) method. After that, the short-run and long-run symmetric and asymmetric effects were estimated through linear and non-linear autoregressive distributed lag (ARDL) models, respectively.FindingsThe authors found short-run and long-run symmetric and asymmetric effects of governance, unemployment and consumer prices (CPI) on the CR in Pakistan. For asymmetric effects, the findings show that high-quality governance diminishes and poor governance accelerates committed crimes in Pakistan. Interestingly, the asymmetric unemployment effect suggests that criminal behavior diminishes when people find job opportunities and do not adopt criminal behavior even if people lose employment. In other words, if unemployment decreases CR will fall, and when unemployment increases, the CR may not increase. Lastly, rising product prices lead to criminal behavior, while falling prices do not help to diminish the CR in Pakistan.Originality/valueThe study provides the first empirical evidence of symmetric and asymmetric responses of CR toward composite governance index, UR and consumer price index.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-09-2022-0625