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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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Fax: (508) 793-3708
Web page: http://www.holycross.edu/departments/economics/website/
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Keywords: Location choice; crime valuation; methamphetamine; housing prices;

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  1. 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.
  2. 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.
  3. 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.
  4. 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.
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