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Ran Tao and Hong Zhao
''Crime Rate, Housing Price, and Value of A Statistical Case of Homicide''
( 2019, Vol. 39 No.3 )
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.
Keywords: housing price, crime rate, hedonic model, value of life
JEL: R2 - Urban, Rural, and Regional Economics: Household Analysis: General
J1 - Demographic Economics: General
Manuscript Received : Apr 07 2019 Manuscript Accepted : Jul 08 2019

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