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The Cost of Avoiding Crime: The Case of Bogotá

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  • Alejandro Gaviria

    ()

  • Carlos Medina

    ()

  • Leonardo Morales

    ()

  • Jairo Nuñez

    ()

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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Bibliographic Info

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

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References

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  1. Sherwin Rosen, 2002. "Markets and Diversity," American Economic Review, American Economic Association, vol. 92(1), pages 1-15, March.
  2. 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.
  3. Donohue, John J. & Levitt, Steven D., 2000. "The Impact of Legalized Abortion on Crime," Berkeley Olin Program in Law & Economics, Working Paper Series qt00p599hk, Berkeley Olin Program in Law & Economics.
  4. Fajnzylber, Pablo & Lederman, Daniel & Loayza, Norman, 2002. "What causes violent crime?," European Economic Review, Elsevier, vol. 46(7), pages 1323-1357, July.
  5. 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.
  6. 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.
  7. Alejandro Gaviria & Carmen Pagés-Serra, 1999. "Patterns of Crime Victimization in Latin America," Research Department Publications 4186, Inter-American Development Bank, Research Department.
  8. 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.
  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..
  10. Jennifer Hunt, 2003. "Teen Births Keep American Crime High," Discussion Papers of DIW Berlin 343, DIW Berlin, German Institute for Economic Research.
  11. Topa, Giorgio, 2001. "Social Interactions, Local Spillovers and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 68(2), pages 261-95, April.
  12. 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.
  13. 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.
  14. 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.
  15. Norman Loayza & Pablo Fajnzylber & Daniel Lederman, 2000. "Crime and Victimization: An Economic Perspective," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  16. 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.
  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. 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.
  19. 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.
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Cited by:
  1. Leonardo Morales, 2013. "Peers Effects on a Fertility Decision: an Application for Medellín Colombia," BORRADORES DE ECONOMIA 010975, BANCO DE LA REPÚBLICA.
  2. 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.
  3. 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.
  4. Carlos Medina & Jorge Andrés Tamayo Author-Email jtamayca@banrep.gov.co, . "An Assessment of How Urban Crime and Victimization Affects Life Satisfaction," Borradores de Economia 640, Banco de la Republica de Colombia.
  5. Leonardo Morales, 2013. "Peers Effects on a Fertility Decision: an Application for Medellín Colombia," Borradores de Economia 777, Banco de la Republica de Colombia.

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