Essays in Applied Microeconomics: crime, wage inequality and the financial crisis

My proposed research agenda combines two strands. In projects 1 & 2, I investigate potential reasons and remedies for criminal offences in the UK which have risen by over 50% since 2014 and are predicted to rise further (ONS, 2022). In the second strand (project 3), I expand research started during my Master, to explain the mechanisms behind the widely documented, long-term positive trend in wage inequality (Schaefer and Singleton, 2020).
Throughout my PhD, I employ advanced quantitative methods - including recent advances in difference-in-difference methods. Innovative, large data coupled with developments in causal inference and spatial econometrics provides new opportunities to study these phenomena. I aim to provide new evidence on the determinants of crime and wage inequality, particularly in the aftermath of the financial crisis.
Project 1 investigates the impact of local funding allocations for charitable events and projects on crime rates. Local government funding cuts to public finances have resulted in closures of youth centres and private funding for charities providing similar services is under financial pressure. Advocates of community interventions to prevent youth crime argue that the closure of youth centres has reduced educational support, mentoring and mental health support for young people, resulting in higher rates of youth crimes. I expect that more generous and longer-term projects aimed at improving the human capital and labour mobility of youths have a more persistent effect on crime.
I use granular level information on local projects funded by the National lottery and local area police crime data to investigate whether service provision for young people causally affects the local incidence of crime. The project will illustrate the advantage of improving such local services - either via directed local government funding or via measures to stimulate charitable giving to local charities that are aware of the needs of different communities - to tackle crime, creating a pathway to impact.
In project 2, I use similar data to estimate the impact of the financial crisis on the relationship between unemployment and crime. Macroeconomic shocks such as recessions or periods of high unemployment make the expected benefits of illegal activities relative larger increasing criminal activity. Unfavourable local economic opportunities in some areas may partially explain the geographic variation in crime rates. I therefore investigate how much of the variation in crime is due to local area factors, particularly unemployment, and whether the rising crime rate can be in part explained by a fundamental change in the link between unemployment and crime during the Great Recession. This project links into the governments' "Levelling Up" agenda and sheds light on whether there is a need for more specific interventions tailored to local communities.
The third project concerns wage inequality. A major driver of the growth in wage inequality are rising differences in average wages between firms in the same industry (Faggio et al., 2010). Especially since the financial crisis, labour productivity differences between firms have also grown. There may be mechanisms that explain both phenomena. Market competition leads to resources being reallocated from less to more efficient firms (Coad, 2007). More productive enterprises survive and grow, while those at the bottom of the productivity distribution are more likely to shrink or stagnate. If this selection process has been impaired, perhaps due to a lack of capital mobility following the financial crisis, then difference between firms may persist for long periods of time and given labour market imperfections it may mean that mobility of workers between firms is impaired, thus leading to growing wage disparities (Criscuolo et al., 2020). I test this explanation using a large sample of firms from comprehensive firm-level data.