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Strip Clubs, “Secondary Effects,†and Residential Property Prices

Author

Listed:
  • Taggert J. Brooks

    (University of Wisconsin-La Crosse)

  • Brad R. Humphreys

    (West Virginia University, Department of Economics)

  • Adam Nowak

    (West Virginia University, Department of Economics)

Abstract

The "secondary effects" legal doctrine allows municipalities to zone, or otherwise regulate, sexually oriented businesses. Negative "secondary effects" (economic externalities) justify limiting First Amendment protection of speech conducted inside strip clubs. One example of a secondary effect, cited in no fewer than four United States Supreme Court rulings, is the negative effect of strip clubs on the quality of the surrounding neighborhood. Little empirical evidence that strip clubs do, in fact, have a negative effect on the surrounding neighborhood exists. To the extent that changes in neighborhood quality are reflected by changes in property prices, property prices should decrease when a strip club opens up nearby. We estimate an augmented repeat sales regression model of housing prices to estimate the effect of strip clubs on nearby residential property prices. Using real estate transactions from King County, Washington, we test the hypothesis that strip clubs have a negative effect on surrounding residential property prices. We exploit the unique and unexpected termination of a 17 year moratorium on new strip club openings in order to generate exogenous variation in the operation of strip clubs. We find no statistical evidence that strip clubs have "secondary effects" on nearby residential property prices.

Suggested Citation

  • Taggert J. Brooks & Brad R. Humphreys & Adam Nowak, 2016. "Strip Clubs, “Secondary Effects,†and Residential Property Prices," Working Papers 16-17, Department of Economics, West Virginia University.
    • Handle: RePEc:wvu:wpaper:16-17
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    File URL: https://researchrepository.wvu.edu/cgi/viewcontent.cgi?article=1198&context=econ_working-papers
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    More about this item

    Keywords

    Sexually oriented business; secondary effects doctrine; repeat sales regression model;
    All these keywords.

    JEL classification:

    • K10 - Law and Economics - - Basic Areas of Law - - - General (Constitutional Law)
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations

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