Crime, efficiency of labour and trade: a theoretical analysis

We present a two-sector efficiency wage model of a small open economy in this paper where efficiency of labour not only varies positively with the wage rate and unemployment rate but also varies inversely with the volume of anti-social activity. We analyse how changes in factor endowments affect unemployment rate, size of the anti-social sector, level of output of two sectors, pattern of trade, and level of national income of the country. We also analyse how anti-crime policies, i.e., the punishment policies for anti-socials and unemployment allowances policies affect unemployment rate, output composition, pattern of trade, and the level of national income.