An Investigation on Economic Factor's Nonlinear Impacts on Crime in Iran

This study examines the effects of “unemployment, income inequality, inflation, urbanization, annual growth rate of divorce, and annual growth rate of budget allocated for judicial system” on crime in Iran, based on a non-linear Markov-Switching model used for annual time series data during 1984 to 2013. The results show that there is a non-linear relationship between growth rate of crimes and the mentioned explanatory variables. In the other hand, results based on a regression estimation show that the rate of unemployment, income inequality, inflation, the extent of urbanization, and the growth rate of divorce, in both zero phase (low crime rate) and one phase (high growth rate of crime), have significant positive effects on growth rate of crimes. The results show that the urbanization, unemployment and inflation at zero phase (low crime rate periods) have the highest impact on growth rates of crime, as every one percent increase in the urbanization, unemployment and inflation lead to 1.46, 0.99 and 0.97 percent increase in growth rate of crime in Iran, respectively.In the phase one (low crime rate periods), inflation, urbanization and the growth rate of divorce have highest impact on crime in Iran, as every one percent increase in the three variables leads to 2.54, 2.30 and 2.15 percent increase in growth rate of crime in Iran.
According to the results of an estimation in terms of Markov-Switching Model, probability of the zero phase is equal to 50%, and probability of transition from zero phase to one phase is equal to 48 percent. According to goodness of fit tests, Markov-Switching model is suitable for modeling the mentioned relationships.