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The Cost of Avoiding Crime: The Case of Bogotá

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Author Info
Alejandro Gaviria ()
Carlos Medina ()
Leonardo Morales ()
Jairo Nuñez ()

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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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Paper provided by Banco de la Republica de Colombia in its series Borradores de Economia with number 508.

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Handle: RePEc:bdr:borrec:508

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Related research
Keywords: Housing Demand; Crime; Illegal Behavior; Law Enforcement. Classification JEL: K40; K42; and R21.;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Fajnzylber, Pablo & Lederman, Daniel & Loayza, Norman, 2002. "Inequality and Violent Crime," Journal of Law & Economics, University of Chicago Press, vol. 45(1), pages 1-40, April.
  2. Jennifer Hunt, 2003. "Teen Births Keep American Crime High," Discussion Papers of DIW Berlin 343, DIW Berlin, German Institute for Economic Research. [Downloadable!]
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  3. John Donohue & Steven Levitt, 2000. "The Impact of Legalized Abortion on Crime," NBER Working Papers 8004, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Carlos Medina & Leonardo Morales, 2006. "Stratification and Public Utility Services in Colombia: Subsidies to Households or Distortions on Housing Prices?," BORRADORES DE ECONOMIA 003528, BANCO DE LA REPÚBLICA. [Downloadable!]
    Other versions:
  5. Topa, Giorgio, 2001. "Social Interactions, Local Spillovers and Unemployment," Review of Economic Studies, Blackwell Publishing, vol. 68(2), pages 261-95, April.
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  6. Fajnzylber, Pablo & Lederman, Daniel & Loayza, Norman, 2002. "What causes violent crime?," European Economic Review, Elsevier, vol. 46(7), pages 1323-1357, July. [Downloadable!] (restricted)
  7. Conley, T.G. & Topa, G., 1999. "Socio-Economic Distance and Spatial Patterns in Unemployment," Working Papers 99-04, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
  8. 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. [Downloadable!] (restricted)
  9. 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.. [Downloadable!] (restricted)
  10. 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. [Downloadable!] (restricted)
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  11. Carlos Medina & Jairo Núñez, 2006. "La Oferta De Servicios Del Sector Financiero Formal En Bogotá," DOCUMENTOS CEDE 003043, UNIVERSIDAD DE LOS ANDES-CEDE. [Downloadable!]
  12. 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. [Downloadable!] (restricted)
  13. 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. [Downloadable!]
  14. 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. [Downloadable!] (restricted)
  15. Sherwin Rosen, 2002. "Markets and Diversity," American Economic Review, American Economic Association, vol. 92(1), pages 1-15, March. [Downloadable!]
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  1. Carlos Medina & Leonardo Morales & Jairo Nuñez, 2008. "Quality of Life in Urban Neighborhoods in Colombia:The Cases of Bogotá and Medellín," BORRADORES DE ECONOMIA 005126, BANCO DE LA REPÚBLICA. [Downloadable!]
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