Özet:
This thesis investigates how the optimal government response to criminal activity is shaped by national income and inequality in the manner of public safety expenditures. The literature on this issue is already well established with both theoretical and empirical studies. This thesis puts a different approaches on the government’s motivation behind fighting against crime from the existing literature on choosing the government’s objective function. In many of the studies, the government's objective is to maximize expected social welfare involving criminal activity. In this thesis, I argue that what a government should do is to consider the potential harm from the criminal activity, regardless to what is its expected realization. Otherwise, redistribution effect of criminal activity is legalized, which strictly contradicts with the philosophy behind the concept sovereignty. I create a theoretical model and solve it using this approach, and first show that crime and criminal attempts act differently in response to inequality. Then, I let the government solve an objective function in which the government minimizes the potential harm from the criminal activity, which is defined as the aggregate utility loss in case of all the criminal attempts are successful, and the criminal activity is not taken into account as a redistribution mechanism. Solution to the problem shows that even if crime and the harm from criminal activity changes in inequality, public safety expenditure does not change in inequality while higher income causes higher expenditure. As the last I use a panel data consisting of 54 countries and 3 years to conduct an empirical analysis whose results support the theoretical model.
