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Crime Rate, Housing Price, and Value of A Statistical Case of Homicide

Author

Listed:
  • Ran Tao

    (NEOMA Business School)

  • Hong Zhao

    (NEOMA Business School)

Abstract

We use the fixed effects property hedonic approach with MSA level data to study the impact of the plunge in crime rates in 1990s on local housing price. For a general measure of crime rate, we compose FBI's seven categories of crime into a crime index by using the Sellin-Wolfgang (1964)'s weight of seriousness for different crime categories. To control for potential omitted variable bias, we use an instrumental variable approach based on the legalization of abortion in the 1970s as proposed by Donohue and Levitt (2001). We find a significantly negative relation between crime rate and housing price and further use the estimate to interpret people's marginal willingness to pay for reductions in crime. We obtain a value of a statistical case of homicide of 1.9 million in 1999 dollars.

Suggested Citation

  • Ran Tao & Hong Zhao, 2019. "Crime Rate, Housing Price, and Value of A Statistical Case of Homicide," Economics Bulletin, AccessEcon, vol. 39(3), pages 1727-1739.
    • Handle: RePEc:ebl:ecbull:eb-19-00339
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    More about this item

    Keywords

    housing price; crime rate; hedonic model; value of life;
    All these keywords.

    JEL classification:

    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis
    • J1 - Labor and Demographic Economics - - Demographic Economics

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