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Is there a compensating wage differential for high crime levels? First evidence from Europe

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  • Braakmann, Nils

Abstract

This paper investigates whether high regional crime levels lead to a compensating wage differential paid by firms in the respective region. Using data from German social-security records, official police statistics and official statistics for 2003-2006, I consider both violent and non-violent crimes and use three-way error-components estimators to control for individual and regional heterogeneity. The findings suggest that wages are practically unrelated to changes in crime rates. This result is robust over a wide range of subgroups. There is, however, some evidence that crime rates influence land prices.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 66 (2009)
Issue (Month): 3 (November)
Pages: 218-231

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Handle: RePEc:eee:juecon:v:66:y:2009:i:3:p:218-231

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Web page: http://www.elsevier.com/locate/inca/622905

Related research

Keywords: Compensating wage differential Crime Three-way error-components model;

References

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  1. Julie Berry Cullen & Steven D. Levitt, 1999. "Crime, Urban Flight, And The Consequences For Cities," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 159-169, May.
  2. Abowd, J.M. & Kramarz, F. & Margolis, D.N., 1995. "High-Wage Workers and High-Wage Firms," Cahiers de recherche 9503, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
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  4. Iris Koch & Holger Meinken, 2004. "The Employment Panel of the German Federal Employment Agency," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 124(2), pages 315-325.
  5. Blomquist, Glenn C & Berger, Mark C & Hoehn, John P, 1988. "New Estimates of Quality of Life in Urban Areas," American Economic Review, American Economic Association, vol. 78(1), pages 89-107, March.
  6. Entorf, Horst, 2008. "Crime and the Labour Market: Evidence from a Survey of Inmates," ZEW Discussion Papers 08-131, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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  10. Gartner, Hermann, 2005. "The imputation of wages above the contribution limit with the German IAB employment sample," FDZ Methodenreport 200502_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  11. Roback, Jennifer, 1988. "Wages, Rents, and Amenities: Differences among Workers and Regions," Economic Inquiry, Western Economic Association International, vol. 26(1), pages 23-41, January.
  12. Bowes, David R. & Ihlanfeldt, Keith R., 2001. "Identifying the Impacts of Rail Transit Stations on Residential Property Values," Journal of Urban Economics, Elsevier, vol. 50(1), pages 1-25, July.
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  14. Thomas Cornelissen, 2008. "The Stata command felsdvreg to fit a linear model with two high-dimensional fixed effects," Stata Journal, StataCorp LP, vol. 8(2), pages 170-189, June.
  15. Chen, Yong & Rosenthal, Stuart S., 2008. "Local amenities and life-cycle migration: Do people move for jobs or fun?," Journal of Urban Economics, Elsevier, vol. 64(3), pages 519-537, November.
  16. Steve Gibbons, 2004. "The Costs of Urban Property Crime," Economic Journal, Royal Economic Society, vol. 114(499), pages F441-F463, November.
  17. Martyn Andrews & Thorsten Schank & Richard Upward, 2006. "Practical fixed-effects estimation methods for the three-way error-components model," Stata Journal, StataCorp LP, vol. 6(4), pages 461-481, December.
  18. Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-78, December.
  19. Gerking, Shelby D & Weirick, William N, 1983. "Compensating Differences and Interregional Wage Differentials," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 483-87, August.
  20. Hamermesh, Daniel S., 1999. "Crime and the Timing of Work," Journal of Urban Economics, Elsevier, vol. 45(2), pages 311-330, March.
  21. Stephen Gibbons & Stephen Machin, 2008. "Valuing school quality, better transport, and lower crime: evidence from house prices," Oxford Review of Economic Policy, Oxford University Press, vol. 24(1), pages 99-119, spring.
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Citations

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Cited by:
  1. Braakmann, Nils, 2013. "Crime, health and wellbeing – Longitudinal evidence from Mexico," MPRA Paper 44885, University Library of Munich, Germany.
  2. Braakmann, Nils, 2012. "How do individuals deal with victimization and victimization risk? Longitudinal evidence from Mexico," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 335-344.
  3. Braakmann, Nils, 2012. "The link between non-property crime and house prices – Evidence from UK street-level data," MPRA Paper 44884, University Library of Munich, Germany.

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