DDRIE: Economic Value of Crime Control: Evidence from a Large Investment in Police Infrastructure.

University Of Chicago, Chicago IL

Investigators

Abstract

Economic models of criminal behavior have focused mainly on the effects of investment in policing on crime while ignoring the broader societal benefits of such investments. This research project uses the housing market to study the local welfare effects of a large investment in police infrastructure. Applying a research design based on the openings of police stations in the three large cities, the project studies the effects of public safety investments on crime and housing markets. Specifically, it measures the relationship among police investments, reductions in violent and non-violent crimes and changes in the prices of nearby residential properties. Initial results show that observable police presence reduce overall crime. However, the effect is local; it is within less than half of a mile, with no appreciable impact outside the area where the police stations are built. The researchers then use police station construction to calculate their effects on local housing prices and new construction. The researchers find statistically significant evidence that police stations’ openings increase housing values. The results of this research project provides insights on the effects of police on broader welfare of citizens as well as provide inputs into how to make local government investments efficiently. This DDRIE research project leverages new police station construction in neighborhoods in a number of cities over time to estimate the causal effects of police infrastructure on welfare of local communities. The project consists of two parts---the effects of police station construction on crime rates, and the effects of policing on housing markets. Using quasi-experimental variation in police station construction in neighborhoods and cities, this research project studies the short- and long- term cross-sectional and intertemporal changes in reported crime and finds that police station construction leads to reduction in local crime rates. This part of the project also explores the mechanisms through which police station construction affects reduction in crime, testing both deterrence and incapacitation channels. The second part of the project uses a hedonic pricing model to estimate the effects of crime reduction on property values, thus recovering the price elasticity of crime. This is a first attempt to estimate willingness to pay to avoid crime. The project develops a welfare analysis of crime control that accounts for individual heterogeneity and sorting. This research provides insights on the effects of policing on broader welfare of citizens as well as provide inputs into efficient local government investments decision making. This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.