Alcohol availability and crime: a robust approach

The relationship between alcohol availability and crime is investigated in this study. It first considers common parametric specifications that have been used in the literature. After applying a powerful consistent conditional moment test for correct specification, it is found that these common parametric specifications are rejected by the data. The study then proceeds with a robust nonparametric method that can have a rate of convergence close to that for a correctly specified parametric model when the underlying relationship is somewhat linear. The application of nonparametric methods reveals structure present in the data that would remain undetected when applying common parametric specifications, but more importantly reveals that the impact of alcohol availability is considerably higher than one might believe on the basis of the misspecified parametric model. It is also found that the marginal effect of alcohol availability on crime changes with the level of alcohol availability.