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Economics of CrimeHW Assignment # 21.a. Becker’s model of crime suggests probability of apprehension and punishment could reduce criminality.a. Why would higher income levels potentially reduce crime?b. If you have a cross-section of individuals, and you consider running theregression crimei = ?0 + ?1 ? income + ui , what assumption do you need tohave hold for OLS to be unbiased?c. Do you expect that assumption to hold true? Why or why not?d. Other economists have tested this assumption by aggregating crime ratesand comparing them to aggregate economic conditions. Generally, economistshave found higher unemployment rates is associated with more property crime.Does make sense given your answer to part a?2. Suppose you are studying a community that has 10 individuals. Eachindividual has the utility function U (c, p) = c + ln(p).a. Suppose each individual has an income of 30. P is a unique good becauseits a public good. This means that if I purchase police, my neighbors gets toconsume whatever I purchase, and vice versa. How much c does each individualconsume consume, and how p does everyone consume if the price of c is 2, andthe price of p is 20?b. What is the socially optimal level of P, based on the Samuelson condition?c. How does your answer to part b, compare to a? What is a way we couldget people to purchase more police?3.Use the data file speeding.dta for this problem. This is the dataset for everyspeeding ticket giving in Oregon from 2008-2013 (yes I’m in there, twice).a. In speeding there are natural jumps in punishments for every 10 milesan hour someone exceeds the limit. If you wanted to estimate a regression forhow punishments received for speeding affect future speeding (recidivism) whatwould the equation for a regression discontinuity look like (write an example).b. One critical assumption in RD is that there is no sorting at the thresholds.To see if there is sorting in this data, type “histogram relspeed, d”. Do they dobunch at the thresholds? Do they bunch in other places? If so, why do thinkthis bunching happens?c. To see if it looks like having a speed over the speed limit reduces futurespeeding, type “collapse (mean) recid, by(relspeed)”, then type “scatter recidrelspeed”. Does recidivism decline at the 10 MPH thresholds where fines goup? Do you think any patterns you observe here are free from bias given youranswer to part b?1

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