The link between non-property crime and house prices – Evidence from UK street-level data

Braakmann, Nils (2012): The link between non-property crime and house prices – Evidence from UK street-level data.

Abstract

This paper uses street-level data on house sales and crime rates for England and Wales to look at the existence of compensating differentials for crime risk. In terms of identification my strategy relies on the use of non-parametric regional time trends as well as various fixed effects to control for unobserved amenities and regional economic conditions. The results suggest that each additional case of anti-social behavior lowers house prices in the same street by approximately 1% and each additional case of violent crime by 2%. Drug crime does not appear to matter, as does crime outside of the respective street.

• Item Type: MPRA Paper
• Language: English
• Keywords: cost of crime; compensating differential; house prices
• Subjects: H - Public Economics > H4 - Publicly Provided Goods > H40 - General; K - Law and Economics > K0 - General > K00 - General; K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K42 - Illegal Behavior and the Enforcement of Law; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R21 - Housing Demand; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R23 - Regional Migration ; Regional Labor Markets ; Population ; Neighborhood Characteristics; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location > R31 - Housing Supply and Markets

References

Abadie, Alberto and Dermisi, Sofia. 2008. “Is terrorism eroding agglomeration economies in central business districts? Lessons from the office real estate market in downtown Chicago.” Journal of Urban Economics 64(2), 451-463.

Atkinson, Giles, Andrew Healey, and Susana Mourato. 2005. “Valuing the costs of violent crime: A stated preference approach.” Oxford Economics Papers 57 (4), pp. 559-585.

Becker, Gary S. 1968. “Crime and Punishment: An Economic Approach.” Journal of Political Economy 76(2): 169-217.

Blomquist, Glenn C., Mark C. Berger, and John P. Hoehn. 1988. “New Estimates of Quality of Life in Urban Areas.” American Economic Review 78(1): 89-107.

Bowes, David R., and Keith R. Ihlanfeldt. 2001. “Identifying the Impacts of Rail Transit Stations on Residential Property Values.” Journal of Urban Economics 50(1): 1-25.

Braakmann, Nils. 2009. “Is there a compensating wage differential for high crime levels? First evidence from Europe.” Journal of Urban Economics 66(3): 218–231.

Braakmann, Nils. 2012a. “How individuals deal with victimization and victimization risk? Longitudinal evidence from Mexico.” Forthcoming: Journal of Economic Behavior and Organization.

Braakmann, Nils. 2012b. “The health cost of crime - Longitudinal evidence from Mexico.” Mimeo, Newcastle upon Tyne.

Braakmann, Nils. 2012c. “Spatial aggregation and the unemployment-crime relationship.” Mimeo, Newcastle upon Tyne.

Carmichael, Fiona and Robert Ward, 2001. Male unemployment and crime in England and Wales. Economics Letters 73(1), pp. 111-115.

Cohen, Mark A., Roland T. Rust, Sara Steen, and Simon T. Tidd. 2004. “Willingness-to-pay for crime control programs.” Criminology 42(1): 89–110.

Collins, Nick, 2011. “House prices could be hit by crime maps.” The Telegraph, February 1, 2011. http://www.telegraph.co.uk/news/uknews/crime/8294104/House-prices-could-be-hit-by-crime-maps.html.

Cullen, Julie B. and Steven D. Levitt. 1999. “Crime, urban flight, and the consequences for cities.” Review of Economics and Statistics 81(2): 159-169.

Edmark, Karen, 2005. Unemployment and crime: Is there a connection? Scandinavian Journal of Economics 107(2), pp. 353-373.

Freeman, Richard B. 1999. “The Economics of Crime.” In: Ashenfelter, Orley, and David Card (eds.). Handbook of Labor Economics, Vol. 3C. North-Holland: 3529-3571.

Gerking, Shelby D., and William N. Neirick. 1983. “Compensating Differences and Interregional Wage Differentials.” Review of Economics and Statistics 65(3): 483-487.

Gibbons, Steve. 2004. “The Cost of Urban Property Crime.” The Economic Journal 114(499): F441-F463.

Gould, Eric D., Bruce A. Weinberg, and David B. Mustard. 2002. “Crime rates and local labor market opportunities in the United States: 1979–1997.” Review of Economics and Statistics 84(1): 45–61.

Hamermesh, Daniel S. 1999. “Crime and the Timing of Work.” Journal of Urban Economics 45(2): 311-330.

Linden, Leigh and Jonah E. Rockoff. 2008. “Estimates of the Impact of Crime Risk on Property Values from Megan's Laws.” American Economic Review 98(3), pp. 1103-1127.

Ludwig, Jens and Philip J. Cook. 2001. “The Benefits of Reducing Gun Violence: Evidence from Contingent-Valuation Survey Data.” Journal of Risk and Uncertainty 22(3): 207-226.

Lynch, Allen K., and Rasmussen, David W. 2001. “Measuring the impact of crime on house prices.” Applied Economics 33(15): 1981-1989.

Manning, Alan, 2003. “Monopsony in motion: imperfect competition in labor markets”, Princeton University Press.

Manning, Alan, 2011. “Imperfect competition in the labor market”, in: O. Ashenfelter & D. Card (eds.), Handbook of Labor Economics, Volume 4B, Elsevier, pp. 973–1041.

Raphael, Steven and Rudolf Winter‐Ebmer, 2001. Identifying the Effect of Unemployment on Crime. Journal of Law and Economics 44(1), pp. 259-283

Reilly, Barry and Robert Witt, 1996. Crime, deterrence and unemployment in England and Wales: An empirical analysis. Bulletin of Economic Research 48(2), pp. 137-159.

Roback, Jennifer. 1982. “Wages, Rents, and the Quality of Life.” Journal of Political Economy 90(6): 1257-1278.

Roback, Jennifer. 1988. “Rents, and Amenities: Differences Among Workers and Regions.” Economic Inquiry 26(1): 23-41. Office for National Statistics, 2004. “Census 2001. Key statistics for postcode sectors in England and Wales.” ONS, London.

Piehl, Anne M. 1998. “Economic conditions, work and crime.” In: Tonry, Michael (Ed.). The Handbook of Crime and Punishment. Oxford University Press, Oxford” 302–319.

Pope, Jaren C. 2008. “Fear of crime and housing prices: Household reactions to sex offender registries.” Journal of Urban Economics 64(3), pp. 601-614.

Powdthavee, Nattavudh. 2007. “Unhappiness and Crime: Evidence from South Africa.” Economica 72(287): 531-547.

Schmidt, Lucie, and Paul N. Courant. 2006. “Sometimes Close is Good Enough: The Value of Nearby Environmental Amenities.” Journal of Regional Science 46(5): 931-951.

Smith, Claudia. 2005. “Immigration, Crime and Compensating Wage Differential: Evidence from the Mariel Boatlift.” Mimeo, Syracuse.

Vincenty, Thaddeus (1975): “Direct and inverse solutions of geodesics on the ellipsoid with application of nested equations”, Survey Review 22(176), pp. 88-93.