The direction of causality? Drugs, Inequality and Security Guards

In an earlier post, I expressed doubts regarding the relation between income inequality and the demand for private security. Although there is research going in that direction, the issue at play is causality. I proposed that the war on drugs created an unsafe environment which increased demand for private security and that one could find a correlation between both drug arrests and inequality which imitates the correlation between private security forces and inequality.


Which causes which? Are inequalities driving up the demand for private security or are drug arrests the main culprit? Running a pretty standard OLS regression of private security guards per 1,000 inhabitants over income per capita, the gini coefficient, population density, ethnic fragmentation and drug arrests per 1,000 inhabitants yields that none of the variables are significant to explain the size of the private security labour force.  So? Could it be that the war on drugs creates noise in the data? States where the war on drugs is the fiercest also seem to be the states with the most inequalities and so the war on drugs could be driving up demand  for private security in these states.  Maybe this warrants a full paper with appropriate testing of causality?


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