The purpose of this paper is to develop and empirically test an economic model of police expenditure. Pref ectural police is hypothesized as having the ability to choose a level of safety for its residents which maximize its net benefits to its budget constraint.
The model derived in this paper consists of two equations. The first is the police expenditure equation and the second is the safety equation. A simultaneous equation model was used due to the interdependence of the safety level and police expenditure.
The equations were estimated for a cross-sectional sample of 47 Japanese prefectures using 1988 data. Two-stage least squares was the estimation technique.
The regression result for the police expenditure equation showed that the police expenditure reacts inversely to the safety level and that both estimates for price and income elasticities of demand are consist with expected signs.
On the other hand, the regression result for the safety equation was unstable depending on whether the constant term is included or not. The regression result for the equation excluding the constant term showed that the police expenditure has a positive effect on the safety level and that the level of population and the density of population have a negative impact on the safety level.