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Crime, house prices, and inequality: the effect of UPPs in Rio

Author

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  • Frischtak, Claudio

    (International Growth Centre and Inter.B Consultoria Internacional de Negócios)

  • Mandel, Benjamin R.

Abstract

We use a recent policy experiment in Rio de Janeiro, the installation of permanent police stations in low-income communities (or favelas), to quantify the relationship between a reduction in crime and the change in the prices of nearby residential real estate. Using a novel data set of detailed property prices from an online classifieds website, we find that the new police stations (called UPPs) had a substantial effect on the trajectory of property values and certain crime statistics since the beginning of the program in late 2008. We also find that the extent of inequality among residential prices decreased as a result of the policy. Both of these empirical observations are consistent with a dynamic model of property value in which historical crime rates have persistent effects on the price of real estate.

Suggested Citation

  • Frischtak, Claudio & Mandel, Benjamin R., 2012. "Crime, house prices, and inequality: the effect of UPPs in Rio," Staff Reports 542, Federal Reserve Bank of New York.
  • Handle: RePEc:fip:fednsr:542
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    References listed on IDEAS

    as
    1. Fabio Veras Soares & Sergei Suarez Dillon Soares & Marcelo Medeiros & Rafael Guerreiro Osório, 2006. "Cash Transfer Programmes in Brazil: Impacts on Inequality and Poverty," Working Papers 21, International Policy Centre for Inclusive Growth.
    2. Timothy Besley & Hannes Mueller, 2012. "Estimating the Peace Dividend: The Impact of Violence on House Prices in Northern Ireland," American Economic Review, American Economic Association, vol. 102(2), pages 810-833, April.
    3. Mario J. Rizzo, 1979. "The Effect of Crime on Residential Rents and Property Values," The American Economist, Sage Publications, vol. 23(1), pages 16-21, March.
    4. 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 1103-1127, June.
    5. Bruce L. Benson & Simon W. Bowmaker, 2005. "Economics of crime," Chapters,in: Economics Uncut, chapter 4 Edward Elgar Publishing.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. repec:bla:ijurrs:v:40:y:2016:i:3:p:621-639 is not listed on IDEAS
    2. Taggert J. Brooks & Brad R. Humphreys & Adam Nowak, 2016. "Strip Clubs, “Secondary Effects,†and Residential Property Prices," Working Papers 16-17, Department of Economics, West Virginia University.

    More about this item

    Keywords

    wealth distribution; amenity value; real estate;

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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