Investigating the Long-Run and Causal Relationship between GDP and Crime in Sweden

Sammanfattning: Crime is one of the most harmful social problems throughout the world suggesting that the topic of crime is one of the most important research areas within the field of economics. This thesis attempts to shed some new light on the relationship between crime and gross domestic product (GDP) in Sweden. More specifically the aim of the paper is to look for the existence of a cointegration relationship between GDP and various categories of crime in Sweden using annual data from 1950 to 2012. It does this by means of the bounds-testing approach to cointegration and vector error correction models. It further tests for Granger causality. The results differ depending on the crime category. They do, however, show that there indeed exists a long-run equilibrium relationship between GDP and some crime categories while not with others. Furthermore, Granger causality results imply that GDP is more often than not a determinant of crime rather than a result of crime.