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The Cost of Avoiding Crime: The Case of Bogotá

In: The Economics of Crime: Lessons for and from Latin America

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Author Info

  • Alejandro Gaviria
  • Carlos Medina
  • Leonardo Morales
  • Jairo Núñez

Abstract

We use hedonic price models to estimate the value households are willing to pay to avoid violent crime in the city of Bogotá. We find that households living in the highest socioeconomic level (stratum 6) pay up to 7.2% of their house values in order to prevent average homicide rates from increasing in one standard deviation. Households in stratum 5 pay up to 2.4% of their house values to prevent homicide rates from increasing. The results indicate the willingness to pay for security by households in Bogotá, and additionally, reveal that a pure public good like security, ends up creating urban private markets that auction security. These markets imply different levels of access to public goods among the population, and actually, the exclusion of the poorest. We find as well evidence of negative capitalization of the rate of attacks against life, and positive capitalization of the presence of police authority.

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This chapter was published in:

  • Rafael Di Tella & Sebastian Edwards & Ernesto Schargrodsky, 2010. "The Economics of Crime: Lessons for and from Latin America," NBER Books, National Bureau of Economic Research, Inc, number dite09-1.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 11835.

    Handle: RePEc:nbr:nberch:11835

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    1. Alejandro Gaviria & Carmen Pagés-Serra, 1999. "Patterns of Crime Victimization in Latin America," IDB Publications 4124, Inter-American Development Bank.
    2. Giles Atkinson & Andrew Healey & Susana Mourato, 2005. "Valuing the costs of violent crime: a stated preference approach," Oxford Economic Papers, Oxford University Press, vol. 57(4), pages 559-585, October.
    3. Jennifer Hunt, 2003. "Teen Births Keep American Crime High," NBER Working Papers 9632, National Bureau of Economic Research, Inc.
    4. John J. Donohue & Steven D. Levitt, 2001. "The Impact Of Legalized Abortion On Crime," The Quarterly Journal of Economics, MIT Press, vol. 116(2), pages 379-420, May.
    5. Sherwin Rosen, 2002. "Markets and Diversity," American Economic Review, American Economic Association, vol. 92(1), pages 1-15, March.
    6. Topa, Giorgio, 2001. "Social Interactions, Local Spillovers and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 68(2), pages 261-95, April.
    7. Norman Loayza & Pablo Fajnzylber & Daniel Lederman, 2000. "Crime and Victimization: An Economic Perspective," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
    8. Fajnzylber, Pablo & Lederman, Daniel & Loayza, Norman, 2002. "Inequality and Violent Crime," Journal of Law and Economics, University of Chicago Press, vol. 45(1), pages 1-40, April.
    9. Carlos Medina & Leonardo Morales, . "Stratification and Public Utility Services in Colombia: Subsidies to Households or Distortions on Housing Prices?," Borradores de Economia 422, Banco de la Republica de Colombia.
    10. 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.
    11. Gyourko, Joseph & Kahn, Matthew & Tracy, Joseph, 1999. "Quality of life and environmental comparisons," Handbook of Regional and Urban Economics, in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 37, pages 1413-1454 Elsevier.
    12. Heinemann, Alessandra & Verner, Dorte, 2006. "Crime and violence in development : a literature review of Latin America and the Caribbean," Policy Research Working Paper Series 4041, The World Bank.
    13. 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.
    14. Jens Ludwig & Philip J. Cook, 1999. "The Benefits of Reducing Gun Violence: Evidence from Contingent-Valuation Survey Data," NBER Working Papers 7166, National Bureau of Economic Research, Inc.
    15. Leonardo Morales Zurita & Fabio Alberto Arias Arbeláez, 2008. "La calidad de la vivienda en Bogotá: Enfoque de precios hedónicos de hogares y de agregados espaciales," REVISTA SOCIEDAD Y ECONOMIA - CIDSE, UNIVERSIDAD DEL VALLE - CIDSE.
    16. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    17. Carlos Medina & Jairo Núñez, 2006. "La Oferta De Servicios Del Sector Financiero Formal En Bogotá," DOCUMENTOS CEDE 003043, UNIVERSIDAD DE LOS ANDES-CEDE.
    18. John J. Donohue & Steven D. Levitt, 1999. "Legalized Abortion and Crime," JCPR Working Papers 104, Northwestern University/University of Chicago Joint Center for Poverty Research.
    19. Fajnzylber, Pablo & Lederman, Daniel & Loayza, Norman, 2002. "What causes violent crime?," European Economic Review, Elsevier, vol. 46(7), pages 1323-1357, July.
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    Cited by:
    1. Carlos Medina & Jorge Andrés Tamayo, 2011. "An Assessment of How Urban Crime and Victimization Affects Life Satisfaction," BORRADORES DE ECONOMIA 007876, BANCO DE LA REPÚBLICA.
    2. Carlos Medina & Leonardo Morales & Jairo Nuñez, . "Quality of Life in Urban Neighborhoods in Colombia: The Cases of Bogotá and Medellín," Borradores de Economia 536, Banco de la Republica de Colombia.
    3. Leonardo Morales, 2013. "Peers Effects on a Fertility Decision: an Application for Medellín Colombia," BORRADORES DE ECONOMIA 010975, BANCO DE LA REPÚBLICA.
    4. Leonardo Morales, 2013. "Peers Effects on a Fertility Decision: an Application for Medellín Colombia," Borradores de Economia 777, Banco de la Republica de Colombia.
    5. Carlos Medina & Christian Posso & Jorge Andrés Tamayo, 2011. "Costos de la violencia urbana y políticas públicas: algunas lecciones de Medellín," BORRADORES DE ECONOMIA 009076, BANCO DE LA REPÚBLICA.

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