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The Lasting Effects of Crime: The Relationship of Discovered Methamphetamine Laboratories and Home Values

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  • Joshua Congdon-Hohman

    ()
    (Department of Economics, College of the Holy Cross)

Abstract

This study estimates a household’s willingness to pay to avoid the stigma of crime while minimizing concerns of omitted variable bias. By assuming methamphetamine producers locate approximately at random within a narrowly defined neighborhood, this study is able to use hedonic estimation methods to estimate the impact of the discovery of a methamphetamine laboratory on the home values near that location. Specifically, the analysis designates those closest to the site as the treated, while those slightly farther away act as the comparison group. The discovery of a methamphetamine laboratory has a significant effect on the property values of those homes close to the location that peaks from six to 12 months after each lab’s discovery. The estimates found in this study range from a decrease in sale prices of ten to nineteen percent in the year following a laboratory’s discovery compared to the prices for homes that are farther away but still in the same neighborhood. Surprisingly, the impact does not appear to depend on intensity as both the discovery of a second lab and being very close to the discovered lab do not adversely impact home values.

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File URL: http://college.holycross.edu/RePEc/hcx/Congdon_MethLabs.pdf
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Bibliographic Info

Paper provided by College of the Holy Cross, Department of Economics in its series Working Papers with number 1114.

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Length: 33 pages
Date of creation: Nov 2011
Date of revision:
Handle: RePEc:hcx:wpaper:1114

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Keywords: Location choice; crime valuation; methamphetamine; housing prices;

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  1. Lucas W. Davis, 2004. "The Effect of Health Risk on Housing Values: Evidence from a Cancer Cluster," American Economic Review, American Economic Association, vol. 94(5), pages 1693-1704, December.
  2. Sandra E. Black, 1997. "Do better schools matter? Parental valuation of elementary education," Research Paper 9729, Federal Reserve Bank of New York.
  3. 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.
  4. Lawrence Katz & B. Jeffrey Liebman, 2000. "Moving to Opportunity in Boston: Early Results of a Randomized Mobility Experiment," Working Papers 820, Princeton University, Department of Economics, Industrial Relations Section..
  5. Leigh Linden & Jonah E. Rockoff, 2008. "Estimates of the Impact of Crime Risk on Property Values from Megan's Laws," American Economic Review, American Economic Association, vol. 98(3), pages 1103-27, June.
  6. Thaler, Richard, 1978. "A note on the value of crime control: Evidence from the property market," Journal of Urban Economics, Elsevier, vol. 5(1), pages 137-145, January.
  7. Michael Greenstone & Justin Gallagher, 2005. "Does Hazardous Waste Matter? Evidence from the Housing Market and the Superfund Program," NBER Working Papers 11790, National Bureau of Economic Research, Inc.
  8. 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..
  9. Steve Gibbons, 2004. "The Costs of Urban Property Crime," Economic Journal, Royal Economic Society, vol. 114(499), pages F441-F463, November.
  10. Kuziemko, Ilyana & Levitt, Steven D., 2004. "An empirical analysis of imprisoning drug offenders," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 2043-2066, August.
  11. Carlos Dobkin & Nancy Nicosia, 2009. "The War on Drugs: Methamphetamine, Public Health, and Crime," American Economic Review, American Economic Association, vol. 99(1), pages 324-49, March.
  12. Pope, Devin G. & Pope, Jaren C., 2012. "Crime and property values: Evidence from the 1990s crime drop," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 177-188.
  13. Pope, Jaren C., 2008. "Fear of crime and housing prices: Household reactions to sex offender registries," Journal of Urban Economics, Elsevier, vol. 64(3), pages 601-614, November.
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Cited by:
  1. Ooi, Joseph T.L. & Le, Thao T.T., 2013. "The spillover effects of infill developments on local housing prices," Regional Science and Urban Economics, Elsevier, vol. 43(6), pages 850-861.

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