Crime and Hand Unemployment Rate - Free Essay Example

CHAPTER I THE PROBLEM AND ITS BACKGROUND INTRODUCTION Crime is an offense against the values system of a social and has always plagued every society in human history. It is a wrongdoing classified by the state or the parliament of the country or law of the land. The cost and effect of crime vary among the various segments of the population and touch almost everyone by some degree in general as the economic growth and development of countries changes. There is no doubt that crime conflicts enormous monetary and physiological cost on society. Many contemporary macro-level theories of criminal behavior and empirical studies pf crime rates address the relationship between economic factor and crime. Relationship between economic circumstances such as wage inflation and unemployment to criminal activity is the main subject matter of this study. Wage inflation and unemployment taken as predictors of crime rates. Unemployment and inflation are two intricately linked economic concept. In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time and it is also erosion in the purchasing power of money. And unemployment occurs when a person is able to and willing to work but currently without work. Unemployment is usually measured using the unemployment rate which is defined as the percentage of those in the labor for who are unemployed. One causes of unemployment is inflation. Over the years there has been a number of economists trying to interpret the relationship between the concepts of inflation and unemployment. This relationship is also known as the Phillips curve. Phillips curve is an inverse relationship between rate of unemployment and rate of increase in money wages. The higher the rate of unemployment, the lower the rate of wage inflation. In other words, there is a tradeoff between wage inflation and unemployment lead to a problem that individual do such a thing just to endure it. It means that if you are unemployed you will do anything to earn and to survive for everyday living. For this, some people tend to commit crimes especially crime against property. It is a common observation of many countries that unemployment rates and all crime rates are positively associated but negatively in the wage inflation. It is more continues issue within this association means that unemployment causes crime. The determining factor for crime rates are wage inflation and unemployment. When inflation occurs, many people are employed that result to a lowest possible crime rates. But as unemployment occurs, there is a wage deflation that’s why people are committing different criminal activities. BACKGROUND OF THE STUDY The National Capital Region (NCR) is the center of Luzon, also called as Metro Manila, is often and considered as the political, economic, social and cultural center of Philippines. It is subdivided into 17 local government area- 16 cities and is municipalities. Metro Manila is composed of almost all the cultural groups of the Philippines. The principal Language used is tagalong with English as the secondary language. Metro Manila is considered the country’s premiers business region with adequate facilities and services in transportation, housing and commercial infrastructure, communication, power supply and recreational facilities. It has world-class malls and commercial center. Its total land area of 6, 3610 sq. m includes residential, industrial, institutional and agricultural areas and unclassified public forests. In 2000, the regions population was 10, 492,000 which increases to more than 13 million during daytime due to a large workforce residing in the area residing in the area adjoining the metropolis but working in the city. In the national capital region crime perceived as one of the problem in the area. Crime offers a way in which improvished p eople can obtain material goods that they cannot attain through legitimate means. Crime has been with us from the very beginning, it has never cease the disturb mens living together. The overriding determining factor for crime rates are inflation and unemployment rate. In the other hand unemployment rate increased in the eight regions, with NCR recording the highest increase. NCR unemployment rate increase from 19. 7% up to 22. 5% a year ago. Same as there’s an increased in the inflation of NCR from 144 to 148. 4% and last the index crime rate of NCR rose from the 80. 2% up to 81. 9% by the year of 2008. Inflation destroys the value of money. We work for money so in effect money represents our labor. When the money we work for destroyed through no fault of our own, all the work or labor we put forth to earn, the money also destroyed. When unemployment occurs people are being rubbed of their labor and feel that a wrong has been committed against them. Under such circumstances people are much more likely to commit wrong against other people which cause crime rates to rise. OBJECTIVE OF THE STUDY The main objective of this research study is to analyze and determine the effect of inflation and unemployment rate on index crime rate, case of National Capital Region by year 1989-2008. The specific objectives of the study also focus on the following areas; * Determine how wage inflation affect unemployment rate * To estimate the impact of economic variables on the recorded crime rate. * To use important policy making on assessment purposes * Aims to provide information advice and guidance toward implementation of policies which can genuinely reduce the inflation rate especially the wage inflation and unemployment as well as index crime rate. THEORETICAL FRAMEWORK The following theories will provide the idea regarding the subject matter of the study. These theories are the Philips curve and rational choice theory. Philips curve was proposed by A. W. Philips, it was established by year 1958; is an inverse relationship between the rate of unemployment and the rate of increase in money wages. The higher the rate of unemployment, the lower the rate of wage inflation. In other words, there is a trade-off between wage inflation and unemployment. The Philips curve shows that the rate of wage inflation decreases with the employment rate. Letting Wtbe the wage this period, Wt+1 be the wage next period. The rate of wage inflation, Gw, is define as: Gw= Wt+1-WtWt Wages will start rising, pricing too will rise and eventually the economy will return to the full employment level of output and unemployment. This point can be readily seen by rewriting the equation, using the definition of rate of wage inflation, in order to look at the levels of wage today relative to the past level. Rational Choice Theory is an approach used by social scientists to understand human behavior. The approach has long been the dominant paradigm in economics, but in recent decades it has become more widely used in other disciplines such as Sociology, Political Science, and Anthropology. This spread of the rational choice approach beyond conventional economic issues is discussed by Becker (1976), Radnitzky and Bernholz (1987), Hogarth and Reder (1987), Swedberg (1990), and Green and Shapiro (1996). Rational choice theory, also known as  choice theory  or  rational action theory, is a framework for understanding and often  formally modeling social and economic behavior  It is the main theoretical  paradigm  in the currently-dominant school of  microeconomics. Rationality (wanting more rather than less of a good) is widely used as an assumption of the behavior of individuals in microeconomic models and analysis and appears in almost all economics textbook treatments of human decision-making. It is also central to some of modern  political science  and is used by some scholars in other disciplines such as  sociology and  philosophy. It is the same as  instrumental rationality, which involves seeking the most cost-effective means to achieve a specific goal without reflecting on the worthiness of that goal. Gary Becker  was an early proponent of applying rational actor models more widely. He won the 1992  Nobel Memorial Prize in Economic Sciences  for his studies of discrimination, crime, and  human capital. The rationality described by rational choice theory is different from the colloquial and most philosophical uses of the word. For most people, rationality means sane, in a thoughtful clear headed manner, or knowing and doing whats healthy in the long term. Rational choice theory uses a specific and narrower definition of rationality simply to mean that an individual acts  as if  balancing costs against benefits to arrive at action that maximizes personal advantage. ]  For example, this may involve kissing someone, cheating on a test, using cocaine, or murdering someone. In rational choice theory, all decisions, crazy or sane, are postulated as mimicking such a rational process. The practitioners of strict rational choice theory never investigate the origins, nature, or validity of human motivations (why we want what we want) but instead restrict themselves to examining the expression of  given  and inexplicable wants in specific social or economic environments. That is, they do not examine the biological, psychological, and sociological roots that make people see the  benefits  encouraging them to kiss another, cheat on a test, use cocaine, or murder someone. Instead, all that is relevant are the costs of doing so which for crimes, reflects the chance of being caught. In rational choice theory, these costs are only  extrinsic  or external to the individual rather than being  intrinsic  or internal. That is, strict rational choice theory would not see a criminals self-punishment by inner feelings of remorse, guilt, or shame as relevant to determining the costs of committing a crime. In general, rational choice theory does not address the role of an individuals sense of morals or ethics in decision-making. Because rational choice theory lacks understanding of consumer motivation, some economists restrict its use to understanding business behavior where goals are usually very clear. Although models used in rational choice theory are diverse, all assume individuals choose the best action according to unchanging and stable preference  functions and constraints facing them. Most models have additional assumptions. However, it may not be possible to empirically test or falsify the rationality assumption, so that the theory leans heavily toward being a  tautology  (true by definition) since there is no effort to explain individual goals. Nonetheless,  empirical  tests can be conducted on some of the results derived from the models. In recent years the theoretical vision of rational choice theory has been subject to more and more doubt by the experimental results of  behavioral economics. This criticism has encouraged many social scientists to utilize concepts of  bounded rationality  to replace the absolute rationality of rational choice theory: this points to the difficulties of data-processing and decision-making associated with many choices in economics, political science, and sociology. More economists these days are learning from other fields, such as  psychology, in order to get a more accurate view of human decision-making than offered by rational choice theory. Because of the relative success of economics at understanding markets, rational choice theory has also become increasingly employed in  social sciences  other than  economics, such as  sociology  and political science in recent decades. It has had far-reaching impacts on the study of  political science, especially in fields like the study of interest groups, elections, behavior in legislatures, coalitions, and  bureaucracy. Models that rely on rational choice theory often adopt  methodological individualism, the assumption that social situations or collective behaviors are the result of individual actions alone, with no role for larger institutions.. The poor fit between this and sociological conceptions of social situations partially explains the theorys limited use in  sociology. Among other things, sociologys emphasis on the determination of individual tastes and perspectives by social institutions conflicts with rational choice theorys assumption that our tastes and perspectives are given and inexplicable. CONCEPTUAL FRAMEWORK The conceptual framework discussed the flow of the study to be taken. This study used the closed-system approached the system of three-frame is composed of input, which went through the process or operation and merged as the output. The first frame is the input that contains the determinants which are the inflation rate and unemployment rate as an independent variable. We consider these two variables as our determinants because when inflation occurs money losses value it much harder for individuals to survive and the work they put into earnings the money is abused and destroyed. Inflation is an side effect of inflation is that it causes citizens to act towards each other causing high crime rate. That is why we consider the index crime rate as our dependent variable. The second frame is the process which contains the method to be used by researcher the multiple regression analysis. This method will serve as a statistical technique that shows the individual effects of several explanatory variables as a single variable. The third frame is the output. It contains the possible outcome of the study s a result of the process that was done by the researcher which is the effect of inflation and unemployment rate on index crime rate. Figure 1 FEEDBACK The arrow includes the workflow of information in the research paper. The feedback loop connects the input to process included as well as to the output and it made the system continuous. STATEMENT OF THE PROBLEM This research study aims to determine the effect of inflation and unemployment rate on index crime rate, case of National Capital Region by year 1989-2008. The research seeks the possible foundation of the research problem and it could establish by the following questions: 1. What are the two key determinants that can affect index crime rate? 1. 1 inflation 2. 1. 1 wage inflation 2. 1 unemployment 2. How does wage inflation affect unemployment rate? 3. What is the impact of inflation and unemployment rate on index crime rate? 4. Is there any significant relationship between inflation and unemployment rate with crime rate on the National Capital Region by the year 1989-2008? HYPOTHESIS There is no significant relationship between inflation and unemployment. * There is significant effect between unemployment rate and index crime rate on National Capital Region by year 1989-2008. SIGNIFICANCE OF THE STUDY The researcher carried out the studies of the relationship between economic conditions such as inflation and unemployment as predictors of crime rate. The study on crime has generated a substantial volume of literate. The economics profes sion has analyzed the determinants of criminal behavior from both the theoretical and the empirical points of view. This research study will try to make out something credible which goes with our topic about effect of inflation and unemployment rate to index crime rate. The works fits within a growing economic literature on crime and give contribution that shed light on this particular study. We as a researcher will gather some data to analyze this particular topic and will try to find out better solutions that others can rely on. This study is anticipated to contribute additional information to serve the following individuals and organizations. Individual as well as the society especially residents of the National Capital Region will be benefited from this research study because through this they will become more aware that some economic problems breeds a misery such as crime. Policy maker will gain something from this study because it could be utilized as a basis for adoption measures that would be able to reduce inflation rate, unemployment rate and index crime rate especially the crime against property such as robbery and theft. It is recommended that policy maker should focus on the stabilization of the economy because it has significant influence on the variation of crime rate. This study will also create a contribution to economic students relevant into on how the government seek some investigation about this economic problem. Other researchers will also be benefited by this study because it can be an effective tool and reference for them which could attempt to make any further relevant study particularly the present and future economist. SCOPE AND LIMITATIONS The focus of the study is to determine the effect of wage inflation and unemployment rate on index crime rate. The conducting area of the study will be the National Capital Region (NCR) covering the period of 1989-2008. Only limited number of potential influences on crime is be qualified so that not all influencing factors can be addressed since the study formulated a statistical model. The study makes use of time series observation. The study will be using secondary data which gives an accurate data measuring the two economic circumstances such as real wage and unemployment together with crime. By the use of real wage data, we can get the wage inflation. Data will be base on the Philippine Statistical Yearbook, publications of the National Statistical Coordination Board and from the National Statistics Office. Accurate and reliable resources are the things that the researcher will need and use to have a credible and informative research study DEFINITION OF TERMS Crime   is the breach of rules or  laws  for which some  governing authority  (via mechanisms such as  legal systems) can ultimately prescribe a  conviction. Individual human societies may each define crime and crimes differently. While every crime violates the law, not every violation of the law counts as a crime; for example: breaches  and of other  civil law  may rank as offences or as infractions. Modern societies generally regard crimes as offenses against the public or the state, distinguished from  torts  (offenses against private parties that can give rise to a civil cause of action). https://en. wikipedia. org/wiki/Crime Crime rate  is the ratio of crimes in an area to the population of that area; expressed per 1000 population per year. https://www. thefreedictionary. com/crime+rate Index crimes are those violations of the penal code considered to have socio-economic significance, and occur with sufficient regularity to be meaningful. These include crime vs. person (murder, homicide, physical injury and rape), and crime vs. property ( robbery and theft). All other crimes are classified as non-index crime. Inflation  is a rise in the general  level of prices  of goods and services in an  economy  over a period of time. When the price level rises, each unit of currency buys fewer goods and services; consequently, inflation is also erosion in the  purchasing power  of money – a loss of real value in the internal medium of exchange and unit of account in the economy. Inflation rate is a chief measure of price inflation, the annualized percentage change in a general  price index  (normally the  Consumer Price Index) over time. Phillips curve is a historical inverse relationship between the rate of  unemployment  and the rate of  inflation  in an economy. Stated simply, the lower the unemployment in an economy, the higher the rate of  inflation. While it has been observed that there is a stable short run tradeoff between unemployment and inflation, this has not been observed in the long run. Wage  is compensation, usually financial, received by workers  in exchange  for their  labor. Compensation in terms of wages is given to  workers  and compensation in terms of  salary  is given to  employees. Wage Rate is the rate  of  pay  based on  per  unit  of  production  or per  period of work time on the  job. Real wages  refers to wages that have been adjusted for  inflation. This term is used in contrast to  nominal  wages or unadjusted wages. Unemployment  occurs when a person is able and willing to work but currently without  work. The prevalence of unemployment is usually measured using the unemployment rate, which is defined as the percentage of those in the  labor force  who are unemployed. Unemployment rate is the percentage of  the total  labor force  that  is unemployed but actively seeking employment and willing to work. CHAPTER II REVIEW OF RELATED LITERATURE STUDIES This chapter provides deeper understanding of the effect of inflation and unemployment rate on index crime rate. Using related literature and studies, researchers will have a better insights and perspective towards the existing problem. FOREIGN LITERATURE The literature on Economics of Crime sprang from the seminal contribution by Becker (1968) and Ehrlich (1973). In 1968, Becker presented a paper which changed the way of thinking about criminal behaviour. He was the one who built first model of criminal choice stressing that â€Å"some individuals become criminals because of the financial and other rewards from crime compared to legal work, taking account of the likelihood of apprehension and conviction, and the severity of punishment. † The Becker’s paper opened the door to a new field of empirical research whose main purpose was to verify and study the socioeconomic variables that affect crime. Numerous subsequent empirical papers have attempted to test the predictions of the Becker-Ehrlich model, and to find out whether the magnitude of the unemployment effect is quantitatively important. The hallmark of this literature is its failure to reach consensus as to whether higher levels of unemployment lead to a greater incidence of crime. In a survey of the literature, Box (1987) reports 35 reliable studies on the topic, 20 of which find a positive relationship between unemployment and crime, with the remainder unable to find any such relationship. Steven D. Levitt, author of the best-selling book â€Å"Freakonomics,† provides insight on the reasons for the decline in crime in his article, â€Å"Understanding Why Crime Fell in the 1990s: Four Factors that Explain the Decline and Six that Do Not. He agrees with Becker that improvements in labor market opportunities have a relevant impact on crime when there is a financial incentive to commit. He adds that a â€Å"one percent increase in the unemployment rate accounts for a one percent increase in property crimes,† indicating the common use of a double-log regression in past research. However, he does impress upon the reader that increased spending on police and prisons through state and local government budgets is where the economy has the most impact on crime. What appears to have no effect on the decline in crime is the threat of execution and increased gun control laws. He shows in his research that the four factors that do explain the decline are the increase in police force, in prison populations, in the crack epidemic, and the controversial legalization of abortion. The economics of crime interacts with different and heterogeneous fields, i. e. (Sociology, Criminology, Psychology, Geography and Demography) and it is closely related to poverty, social exclusion, wage and income inequality, cultural and family background, level of education and other economic and socio-demographic factors that may affect an individual’s propensity to commit crime such as age, gender and urbanization. Economics of crime has become a new field of investigation, particularly due to the fact that there has been a rapid increase in criminal activities in various western and eastern countries of the world. There is a vast amount of literature available on the relationship between crime and their major determinants in countries like United States, United Kingdom, Germany and Italy. Some studies are also conducted which have analyzed the determinants of crime in Latin American countries such as Colombia and Argentina, e. g. Buohanno (2003). Much research up to now has concluded that violent crime, as opposed to burglary and theft, is pro-cyclical, or higher in good times. This aggregate picture can arise if other crime-driving influences are disregarded. One prime candidate is alcohol consumption, which is higher in good times, but on the other hand is a hefty determinant of all sorts of crime rates. And there are other ‘omitted variables’ that have to be taken into account when analyzing overall crime figures. One is the interaction between crime and joblessness, for the former can also cause the latter. This is a result of what the authors call the ‘scarring effects effect of incarceration or a greater reluctance among the criminally initiated to accept legitimate employment†¦Ã¢â‚¬â„¢Ã‚  Ã‚  Ã‚  When the authors properly take care of these statistical problems, they find a positive impact of unemployment on property crime as well as violent crime. LOCAL LITERATURE Despite some improvement in law and order, crime remained a major problem through the end of the 1980s. Police attributed the countrys chronic crime problems to a variety of social and cultural factors. Widespread poverty and rapid population growth were frequently cited. Population pressures and a shortage of land and jobs in rural areas had produced a steady internal migration to the cities. This urbanization of a traditionally agrarian society was commonly mentioned as cause for increased crime rates. According to the police, the incidence of serious crime escalated through the early 1980s, from approximately 250 crimes per 100,000 population in 1979, to a sustained level of around 310 during 1984 through 1987, then declined in 1988 and 1989. In 1988 the crime rate dipped below 300 crimes per 100,000 people, then fell dramatically in 1989 to 251 crimes per 100,000 citizens. Because of differing reporting practices and degrees of coverage, it was difficult to compare Philippine crime rates to those of other countries. Government officials attributed the decrease in crime to improved police work, but economic conditions appeared to be as important. The deterioration in law and order during the early and mid-1980s accompanied a steadily worsening economy, whereas the improvement in the late 1980s paralleled renewed economic growth under Aquino. Not surprisingly, crime rates were highest in major urban areas, where unemployment was the highest. Regionally, peninsular southern Luzon, the western Visayan islands, and portions of Mindanaoimpoverished rural areas where insurgents were activehad the most criminal activity in the mid-1980s. . FOREIGN STUDIES A Discussion Paper published for the Centre for Economic Policy Research by two economists, Steven Raphael of the University of California at San Diego and Rudolf Winter-Ebmer of the University of Linz, finds support for the view held by most people that when they are out of a job they are more likely to steal because the risks seem more worthwhile. The writers find a significant positive, but also quantitatively large, impact of unemployment on several crime categories. A study by the Heritage Foundation found that â€Å"For every 1 percent increase in civilian labor force participation, violent crime is expected to decrease by 8. 8 incidents per 100,000† people. In other words, when more people are employed, violent crimes decrease. A survey by the Bureau of Justice Statistics reported that 33 percent of state prisoners and 26 percent of federal prisoners in 1991 were unemployed at the time of their arrest. Researchers who reviewed crime and unemployment rates from 1979 to 1993 fount that the unemployment rate of non college-educated men was responsible for 24 percent of the total increase in property crime and 8 percent of the increase in violent crime during this time period. Much research up to now has concluded that violent crime, as opposed to burglary and theft, is pro-cyclical, or higher in good times. This aggregate picture can arise if other crime-driving influences are disregarded. One prime candidate is alcohol consumption, which is higher in good times, but on the other hand is a hefty determinant of all sorts of crime rates. And there are other ‘omitted variables’ that have to be taken into account when analyzing overall crime figures. One is the interaction between crime and joblessness, for the former can also cause the latter. This is a result of what the authors call the ‘scarring effects effect of incarceration or a greater reluctance among the criminally initiated to accept legitimate employment†¦Ã¢â‚¬â„¢Ã‚  Ã‚  Ã‚  When the authors properly take care of these statistical problems, they find a positive impact of unemployment on property crime as well as violent crime. The statistics used for the study are taken from the FBI’s Uniform Crime Reports across the US from 1970 to 1993. They are then broken down according to types of crime and adjusted for poverty and demographic components. The authors note that in a later period, 1992 to 1996, a period when unemployment was falling, there was a dramatic fall in all types of crime. . The authors conclude that if there were improved job prospects for jobless workers, particularly in inner cities, further declines in crime rates would be achieved. Fleisher (1966) studied the role of income on the decision to commit criminal acts by individuals. The author stated that the principal theoretical reason for believing that low income increases the tendency to commit crime is that the probable cost of getting caught is relatively low. It is because of the reason that low income individuals view their legitimate lifetime earning prospects dismally they may expect to lose relatively little earning potential by acquiring criminal records. They feel that not only legitimate earnings are ‘low’ but also the opportunity cost of time actually spent in delinquent activity, or in jail, is low. Becker (1968) presented a model based on costs and benefits. His approach was formed from the usual analysis of the expected utility; that persons will commit crime or offence if they presume that their utility will be greater than if they used their time and resources in some other activity. Ehrlich (1973) considers that unemployment has its effects on crime rate. He says that unemployment rate can be viewed as a complementary indicator of income opportunities available in the legal labour market. Therefore, when unemployment rate increases, the opportunities in the legal sector decrease leading individuals to involve in criminal activities. Fajnzylber et al. (2002) using simple correlations, OLS regressions anddynamic Generalized Method of Moments (GMM) for panel data show that both income inequality and crime rate are positively related. Lee (2002) examines the relationship between labour market conditions and various crime series in three Asia-Pacific countries, Australia, Japan and South Korea. Johansen maximum likelihood cointegration and Granger causality tests were applied to time series data to see the existence of longrun equilibrium or a causal link between unemployment and crime variables. The results of the study rovide a strong support for a long-run equilibrium relationship between unemployment and various crime series. Coomer Nicole (2003) undertook a study to examine the influence of macroeconomic factors on crime. He applied OLS regression to find out the results. In his analysis, he first included unemployment, poverty, prison population, high school and college education level and income disparities as independent variables and run the regression to get the relationship. He then dropped the insignificant variables and rerun the regression and found that unemployment, inflation and poverty influence crime positively. Gumus (2004) uses large US city data to empirically investigate the determinants of crime in urban areas using OLS regression technique. The results indicate that income inequality, per capita income, and presence of black population are all important determinants of crime in urban areas. Unemployment rate and police expenditures have also important effect in the determination of crime. Teles (2004) investigate the effects of macroeconomic policies on crime. He points out that monetary and fiscal policy have an impact on crime. His results show that fiscal policies affect crime through government spending and monetary policy affects crime through inflation. LOCAL STUDIES The Philippines, being a developing country, is not exempted from occurrences of crimes. Newspapers and television news updates are loaded with all sorts of â€Å"misbehavior†: murder, rape, theft, robbery and others. Crime volume is the number of crime incidents per 100,000 population. Total Crime volume for the last four years has been fluctuating. It registered 80,108 in 2000, 76,991 in 2001, 85,776 in 2002 and 83,704 in 2003. For the period January to November 2004, the total crime volume registered is 8. 5% lower compared with the same period last year. Out of the total crime volume, 55% are index crimes and the rest are non index crimes. In terms of crime rate, the 7. 84 crime rate per 100,000 population for January to November 2004 reflected a decrease of 10. 2% compared with the 8. 73 crime rate for the same period in 2003. There is also a decrease of 1. 3% in the overall crime solution efficiency, from 91. 19% in January to November 2003 to 90% in January to November of 2004. Total crime volume was highest in the National Capital Region (NCR) comprising 23. % of the total crime volume nationwide. Crimes in the metropolitan area were prevalent in the highly urbanized cities of Quezon, Manila and Caloocan. Index crime volume from January to November of 2004 was recorded at 39,400. This year it is 39,126 which shows a 0. 70% reduction. Among the classification of index crimes, 57% are crimes against per sons and 43% are crimes against property. Among the 17 regions, NCR registered the highest index crime volume. Index crimes (murder, homicide, physical injuries, rape, robbery and theft) were widespread in Quezon City, Manila and Caloocan City. The theft volume last year was figured at 9,033, while this year it exhibited an upsurge to 9,892 incidents of an increase of 9. 5%. For the same period, non-index crimes reduced by 16. 5% compared with last year. Among the regions NCR registered the highest in Quezon City, Caloocan and Manila. Many authorities in the field of criminal justice say that poverty is a major cause of crime. This is not of course to say that it follows that a person who wallows in wealth cannot be a criminal. Many crimes are committed even by the rich. Furthermore, many people mired in poverty, have remained respectable and exemplary citizens. It is evident that poverty Per Se is not the only reason or cause but it is a major predispositive factor. Nonetheless, the problem of massive poverty is the primary breeding ground or root cause of crime in countries similarly situated as the Philippines. Its concomitant deprivations and hardships are unemployment, underemployment, low income and productivity, malnutrition, big families, rapid population growth rates, and low standard of living. Crime rate appears to be notably higher in poorer neighbourhoods and in areas with high population density, deteriorated living conditions and unemployment problems. People resort to crimes on the street to alleviate or escape from their miseries and frustrations or to answer a need. Illustrative examples are parents who sell their children to paedophiles or a father who resorts to robbery just so he could buy medicine for his sick son. The urban poor are also plagued by among others, the high cost of living, financial difficulties, unstable jobs, lack of capital, limited educational opportunities, inadequate health and sanitation, and inadequate housing. National and local government planners and implementers therefore face increasing demands for urban services like public transportation, garbage collection, piped water, electricity, schools, health and transportation. A deterioration of living conditions in urban areas has produced its share of crime, juvenile delinquency, drug addiction, prostitution, mental illness, physical disability, suicides, family and personal disorganization, environmental degradation, pollution, garbage and sewerage disposals, and traffic jams and congestion. CHAPTER III RESEARCH METHODOLOGY RESEARCH DESIGN This research employed the descriptive approach in the study which according to Zulueta , et all. Focus at the present conditions in order to find new truth such as increased quantity or knowledge, a new â€Å"law†, increased insights into factors which are operating the discovery of more accurate formulation of the problem to be solved. As emphasized by John Best (1990) the descriptive method is concerned with the condition on relationships that exists; practices that prevail; beliefs, points of view are attitudes that are held; processes that are developing. The descriptive method was used to describe and analyze the obtained data. SOURCES OF DATA The researcher made used of data gathered from National Statistics Office (NSO) National Statistics Coordination Board (NSCB) TREATMENT OF DATA The data to be gathered will be presented in tabular and graphical forms to be supported by statistical techniques. STATISTICAL TREATMENT OF DATA CREATING EVALUATING REGRESSION MODEL CR= ? 0+? 1UE+ ? 2WI+? WHERE: CR= crime rate UE= unemployment rate WI= wage inflation ?=error HYPOTHESIS TESTING TEST OF OVERALL SIGNIFICANCE OF THE REGRESSION Test of overall significance is used to determine the ratio of the unexplained or residual variance. It follows the F- distribution with k-1 n-k degrees of freedom, where n is the number of observation and k is the number of parameters estimated. The computed F—ratio is compared with the critical F-ratio and the result was determined accordingly whether the model is statistically significant or not using the one percent level of significance. Fk-1,n-k= R2(k-1)(1-R2)(n-k) 1. TEST OF CORRELATION Coefficient Determination ( R2) The coefficient Determination provides a measure of how well future outcomes are likely to be predicted by model. R2=1- e2y2 Adjusted R2 : A high- adjusted R2 explains that variation in crime is indeed explained by explanatory variable. R=1-1-R2(n-1n-k) 2. TEST OF AUTOCORRELATION Durbin-Watson Statistics It will test the presence of autocorrelation in the residuals from regression analysis. d= t=2T(et-et-1)2t=1Tet2 DURBIN WATSON DECISION RULE (Guajarati, 2003) NULL HYPOTHESIS| DECISION| IF:| No positive autocorrelation| Reject| 0