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The Cost of Avoiding Crime: The Case of Bogotá

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

Author Info

Listed author(s):
  • 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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    Find related papers by JEL classification:
    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

    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.:

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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.
    2. Leonardo Morales & Carlos Medina, 2007. "Stratification and Public Utility Services in Colombia: Subsidies to Households or Distortion of Housing Prices?," ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, vol. 0(Spring 20), pages 41-99, January.
    3. Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-1278, December.
    4. 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.
    5. Carlos Medina & Jairo Núñez, 2006. "La Oferta De Servicios Del Sector Financiero Formal En Bogotá," DOCUMENTOS CEDE 003043, UNIVERSIDAD DE LOS ANDES-CEDE.
    6. Alejandro Gaviria & Carmen Pagés-Serra, 1999. "Patterns of Crime Victimization in Latin America," Research Department Publications 4186, Inter-American Development Bank, Research Department.
    7. Hunt, Jennifer, 2003. "Teen Births Keep American Crime High," CEPR Discussion Papers 3906, C.E.P.R. Discussion Papers.
    8. Fajnzylber, Pablo & Lederman, Daniel & Loayza, Norman, 2002. "What causes violent crime?," European Economic Review, Elsevier, vol. 46(7), pages 1323-1357, July.
    9. 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.
    10. John J. Donohue III & Steven D. Levitt, 2001. "The Impact of Legalized Abortion on Crime," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 379-420.
    11. 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.
    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. Sherwin Rosen, 2002. "Markets and Diversity," American Economic Review, American Economic Association, vol. 92(1), pages 1-15, March.
    14. 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.
    15. Giorgio Topa, 2001. "Social Interactions, Local Spillovers and Unemployment," Review of Economic Studies, Oxford University Press, vol. 68(2), pages 261-295.
    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. Ludwig, Jens & Cook, Philip J, 2001. "The Benefits of Reducing Gun Violence: Evidence from Contingent-Valuation Survey Data," Journal of Risk and Uncertainty, Springer, vol. 22(3), pages 207-226, May.
    18. Norman Loayza & Pablo Fajnzylber & Daniel Lederman, 2000. "Crime and Victimization: An Economic Perspective," ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, vol. 0(Fall 2000), pages 219-302, August.
    19. 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, June.
    20. 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.
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    Cited by:

    1. Carlos Augusto Olarte Bacares, 2014. "Criminality spread: a "Boomerang effect" of public transport improvements?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00973408, HAL.
    2. Alejandro Gaviria & Carlos Medina & Jorge Tamayo, 2010. "Assessing the Link between Adolescent Fertility and Urban Crime," BORRADORES DE ECONOMIA 006860, BANCO DE LA REPÚBLICA.
    3. Carlos Medina & Leonardo Morales & Jairo Nuñez, 2008. "Quality of Life in Urban Neighborhoods in Colombia: The Cases of Bogotá and Medellín," Borradores de Economia 536, Banco de la Republica de Colombia.
    4. Leonardo Fabio Morales, 2015. "Peer Effects on a Fertility Decision: an Application for Medellín, Colombia," ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, vol. 0(Spring 20), pages 119-159, February.
    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.
    6. Manfred Grautoff, Fernando Chavarro, Jazmín Balaguer, 2010. "Torneo criminal, aversión al riesgo y seguridad ciudadana: comportamiento criminal en Bogotá D.C," REVISTA CIFE, UNIVERSIDAD SANTO TOMÁS, June.
    7. 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.

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