Crime and Unemployment in the EU : The Role of Labour Market Policies and Shadow Economy

We examine the crime-unemployment relationship in 26 EU countries and the possibility of potential asymmetries developing in the presence of labour market policies and/or that of certain structural characteristics. We find that the, otherwise well-established, relationship is strongly moderated in the presence of a sizeable underground economic activity and when active labour market policies are used to tackle unemployment. To avoid being misled about the effectiveness of crime fighting policy where a strong link between unemployment and crime cannot be found, policymakers should recognise and further take into account the mitigating effects of elevated levels of shadow economy as well as those of labour market policies