Philippine Crime Rates

Below is the crime trend in the Philippines for the period 1980-2003 as reported by the National Statisctical Coordinating Board. I think they made a typo on the y-axis label and it should read crime per 100,000 population. The surprising thing about this chart for me is that from 1980-84 the Martial Law years, crime rate actually went up. Despite a temporary uptick in late 1980s the general trend has been going down and seems to have stabilized at 100 from 1995 onwards. The early 90s were good growth years for the Philippines and might have something to do with the sharp downward trend. I would like to examine this data in detail and in its regional breakdown.

Crime Rate
1980 to 2003
(per 100,000 population)

LATEST: 103.2 (2003)
HIGH: 313.6 (1984)
LOW: 97.8 (1998)

Source: Philippine National Police (PNP)

Why are some former colonies poor?

Economists have studied the above question extensively, a strand of literature on the subject point to differences in institutions to explain income differences in countries. One paper: The Colonial Origins of Comparative Development" An Empirical Investigation by Acemoglu, Johnson, and Robinson (American Economic Review, 2001, p. 1369-1401) offers an answer at least for countries that were colonized by Europeans. The answer they said lies in the kind of institution that these settlers set up. Using a database on mortality by early settlers, they linked this information with the kind of institutions that settlers developed. For places where mortality is high and thus, the likelihood of long term settlement is nil, colonizers constructed more of an "extractive" institutional set up. In colonies that are more habitable, they started better institutions that endure today. A chart of the early settler mortality and income today shows a negative relationship. So better living conditions that resulted in better institutions in the past resulted in better outcomes today. Now how about the Philippines? Unfortunately Philippines was not included in the database.

Beauty and the Prof

A recent article that came out of the Economics of Education Review (Vol. 24, p. 269-376, 2005) provides evidence on how attractiveness or beauty of the intructor might have an impact on teacher ratings. The authors (Daniel S. Hamermesh and Amy Parker) found statistical support pointing to the greater impact of good looks on men when compared with women, the importance of good looks seem asymetrical as well. Being below average in looks is penalized more than being of higher than average looks is rewarded. Now before professors start rushing out to get extreme makeovers, the link between beauty and teacher ratings might not be as direct, beauty might also coincide with unmeasurable attributes of the instructor. Perhaps, beauty also coincides with being well organized and prepared (as the authors speculated), or beauty would also coincide with greater confidence and ability to relate to more people.

Aborted Crime

I just finished reading an article from The Quarterly Journal of Economics (Vol. 116, Issue 2, 2001). The title of the article is: The Impact of Legalized Abortion on Crime/John Donohue and Steven Levitt (authors). Their theory was interesting, the legalization of abortion in the United States following the Roe vs. Wade decision in 1973 had the unintended consequence of resulting in dramatic lowering of crime rates in the United States. Even more interesting, they showed that five states the legalized abortion 3 years earlier than the rest of the US experienced crime declines in the 1990s faster and greater than rest of the nation.

The underlying story is that the legalization of abortion allowed women who would not have been able to provide a good environment for the child an alternative (in other sense, future criminals were aborted). The authors cited numerous studies that unwanted children belong to the group with the highest risk of criminal activity later in their life. Their findings cast doubt on popular explanations on why crime declined in the 1990s (these explanations included: aging of the population, growth in the economy, increase number of police, and improved policing methods).

One of the authors, Steven Levitt was the recepient of the 2003 John Bates Clark medal (awarded every 2 years to the best economist under 40 by the American Economic Association) he is also a co-author of a recently released bestseller: Freakonomics.

Lost in Memphis

Finally back today. Conference and presentation went well. Flight back did not. It started with delayed boarding, then they we have to wait for a part replacement on the plane, then the air conditioning system on the plane failed to start, have to wait again for that air conditioner engine to start. Finally took off 35 minutes late. Some bad weather around Memphis International Airport, we landed with 10 minutes for me to get to the gate. We were getting close to a gate and for some reason had to turn around and go to the other side of the airport, wrong gate they said. Now we finally docked, had to run to my gate, and my luck-it was just closed as the plane is about to back off and take off. Went to the gate desk, lady tells me that since I bought my ticket at a discount they could not rebook me on a different airline, at this point I said "but it was still your responsibility to get me here on time for me to make my connection." In the end, they had to put me in an airport hotel for a night, gave me 35 minutes of free phone cards, 20 dollars worth of free hotel meals, 10 dollars worth of airport food coupons, and a discount on my next trip. The next morning, our flight was again 30 minutes late because we had to wait for a flight attendant. At least she got a full night's rest. I was glad to reach my final destination and drive my car. At least I finally have some control of my departure and arrival time.

Thinking about discrimination

I was reading this recent dissertation, a chapter in it talks about how tipping a more attractive waitress a bigger amount is discrimination since the same service level of an unattractive server nets a lower tip. They got the data from a number of restaurants as customers leave the door. The customers were asked to rate the attractiveness of their servers and then together with other demographic variables it was matched with the amount of tip. I wonder though if this is really discrimination.

If we are willing to pay a little more for a red bicycle over a blue bicycle is it discrimination? Somehow in the dissertation, paying more for something that appears similar over an alternative is discrimination, the underlying belief here is the two goods/services are identical. But are they? Maybe a dining experience with an attractive server handing you your meal is a different bundle of goods than one were an unattractive server substitutes. It's not discrimination, its two different bundle of goods. As a consumer you should have the right to pay whatever it is you want to pay for it. Now having said that, how about employers discriminating (by paying a higher wage) among employees of the same skills and productivity? They lose money because they are unnecessarily paying extra for an input that is available cheaper. At the limit, market competition bids away input discrimination in the marketplace. This idea's been around for a while now.

The Alchian-Allen Theorem

Alchian and Allen are the two economist who formulated (back in 1964) what is now known in the economics field as the Alchian-Allen Theorem. The theory also goes by its other nickname the travel cost theorem. What this theorem essentially states is as travel or shipping cost is attached to a good, the relative price of the high quality version of that good goes down when compared to its low quality counterpart. In other words: assume you have a high quality and low quality of the same good priced H and L, and it gets shipped to a location N at a fix shipping cost of g, then the relative price of H to L, is now (H+g)/(L+g). It is clear that at location N, the relative price of H to L is now lower. What does this imply? It implies that consumers at location N would consume more of H than L because the relative price of H is lower at that location. It works both ways too, does not matter if the consumer was the one travelling or if the good is the one being shipped.

Examples: tourists eat at nicer restaurants than locals, those who come from places farther than Blacksburg, VA will tend to buy higher quality seats when they come to see the Virginia Tech Hokies play. Japanese consumers would buy more of the unblemished mango coming from the Philippines than the slightly blemished variety. So the nicer mangoes get shipped. When I order from Amazon and I'm faced with a choice between a brand new book for $50 and a used one for $40, with a fixed shipping charge of $5, I tend to click on the brand new one. Alchian-Allen theorem describes my behavior.

Now, can we apply it to international students? If they travel far, incur the travel cost, surely they would be willing to incur additional cost (loss of leisure time) to get better grades than they would back home. Or do they?