Preprint version. Public Finance Review, Volume 29, Issue 1, September 1, 2001, pages 369-393.
Copyright © 2001 Sage Publications.
Fears about insufficient public education spending are often expressed in the area of higher education, whereby it is often argued that increases in expenditures on crime-related programs crowd out expenditures on higher education. This view suggests that higher education and crime-related programs directly compete for government expenditures so that what one program gains the other must lose as in a zero-sum game. A competing hypothesis is that higher crime-related spending leads to higher taxes or public debt issuance or to lower spending on programs other than higher education. We estimate a three-equation model of spending on crime-related programs, spending on higher education, and the crime rate from which we directly test whether spending on crime-related programs and higher education influence each other. Our empirical analysis provides weak evidence that crime-related programs have crowded out spending on higher education.