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The Cost of Avoiding Crime: The Case of Bogotá

Author

Listed:
  • 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.

Suggested Citation

  • Alejandro Gaviria & Carlos Medina & Leonardo Morales & Jairo Nuñez, 2008. "The Cost of Avoiding Crime: The Case of Bogotá," Borradores de Economia 508, Banco de la Republica de Colombia.
  • Handle: RePEc:bdr:borrec:508
    as

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    File URL: http://www.banrep.gov.co/docum/ftp/borra508.pdf
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    References listed on IDEAS

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    5. 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.
    6. 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.
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    9. 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.
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    11. 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.
    12. 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..
    13. 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.
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    15. Fajnzylber, Pablo & Lederman, Daniel & Loayza, Norman, 2002. "What causes violent crime?," European Economic Review, Elsevier, vol. 46(7), pages 1323-1357, July.
    16. 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.
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    Citations

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    Cited by:

    1. Carlos Augusto Olarte Bacares, 2014. "Criminality spread: a "Boomerang effect" of public transport improvements?," Documents de travail du Centre d'Economie de la Sorbonne 14013, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    2. 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.
    3. David M. Vetter & Kaizô I. Beltrão & Rosa M. R. Massena, 2013. "The Impact of the Sense of Security from Crime on Residential Property Values in Brazilian Metropolitan Areas," Research Department Publications IDB-WP-415, Inter-American Development Bank, Research Department.

    More about this item

    Keywords

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

    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

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