A Poverty Trap of Crime and Unemployment

We present an overlapping generation growth model with an imperfect labor market where the links among crime, growth and unemployment are jointly considered, both in an endogenous and exogenous set‐up. We test the major implications of our theory and verify the two model specifications through the Italian regional data, using the Pooled Mean Group estimator proposed by Pesaran, Shin and Smith (1999 ). The empirical results are in favor of the exogenous version of the model and suggest that crime and unemployment have long‐run income level effects.