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In this paper, we have investigated the deterrent effects of sanctions and severity of punishment on crime rates based on the experience of Hong Kong. The effects of socio-economic variables such as unemployment rate, poverty, number of illegal immigrants, and total population on crime rates are also studied. Criminal behaviour is analysed using a utility theoretic framework and criminals are viewed as rational economic agents. Annual data of all categories of crimes committed in Hong Kong from 1972 to 1992 are used to estimate the parameters. In contrast to societies with a European culture, we have found that the crime rates experienced in an Asian city are quite different.