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There Goes the Neighborhood? Estimates of the Impact of Crime Risk on Property Values From Megan's Laws

  • Leigh L. Linden
  • Jonah E. Rockoff

We combine data from the housing market with data from the North Carolina Sex Offender Registry to estimate how individuals value living in close proximity to a convicted criminal. We use the exact location of sex offenders to exploit variation in the threat of crime within small homogenous groupings of homes, and we use the timing of sex offenders' arrivals to control for baseline property values in the area. We find statistically and economically significant negative effects of sex offenders' locations that are extremely localized. Houses within a one-tenth mile area around the home of a sex offender fall by 4 percent on average (about $5,500). We also find evidence that the effect varies with distance within this range -- houses next to an offender sell for about 12 percent less while those a tenth of a mile away or more show no decline. We combine our willingness-to-pay estimates with data on sexual crimes against neighbors to estimate the costs to victims of sexual offenses. We estimate costs of over $1 million per victim -- far in excess of estimates taken from the criminal justice literature. However, we cannot reject the alternative hypotheses that individuals overestimate the risk posed by offenders or view living near an offender as having costs exclusive of crime risk.

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File URL: http://www.nber.org/papers/w12253.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12253.

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Date of creation: May 2006
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Publication status: published as Linden, Leigh L. and Jonah Rockoff. “Estimates of the Impact of Crime Risk on Property Values from Megan’s Laws." American Economic Review 98, 3 (2008): 1103‐27.
Handle: RePEc:nbr:nberwo:12253
Note: LE PE
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  1. Peter F. Colwell & Carolyn A. Dehring & Nicholas A. Lash, 2000. "The Effect of Group Homes on Neighborhood Property Values," Land Economics, University of Wisconsin Press, vol. 76(4), pages 615-637.
  2. Steve Gibbons, 2003. "The Costs of Urban Property Crime," CEP Discussion Papers dp0574, Centre for Economic Performance, LSE.
  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. Giorgio Topa & Stephen Ross & Patrick Bayer, 2005. "Place of Work and Place of Residence: Informal Hiring Networks and Labor Market Outcomes," Working Papers 05-23, Center for Economic Studies, U.S. Census Bureau.
  5. Linda T.M. Bui & Christopher J. Mayer, . "Regulation and Capitalization of Environmental Amenities: Evidence from the Toxic Release Inventory in Massachusetts," Zell/Lurie Center Working Papers 348, Wharton School Samuel Zell and Robert Lurie Real Estate Center, University of Pennsylvania.
  6. David N. Figlio & Maurice E. Lucas, 2004. "What's in a Grade? School Report Cards and the Housing Market," American Economic Review, American Economic Association, vol. 94(3), pages 591-604, June.
  7. Sandra E. Black, 1997. "Do better schools matter? Parental valuation of elementary education," Research Paper 9729, Federal Reserve Bank of New York.
  8. 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.
  9. Kenneth Y. Chay & Michael Greenstone, 2005. "Does Air Quality Matter? Evidence from the Housing Market," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 376-424, April.
  10. 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.
  11. Patrick Bayer & Fernando Ferreira & Robert McMillan, 2004. "Tiebout Sorting, Social Multipliers and the Demand for School Quality," NBER Working Papers 10871, National Bureau of Economic Research, Inc.
  12. Bartik, Timothy J, 1987. "The Estimation of Demand Parameters in Hedonic Price Models," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 81-88, February.
  13. Epple, Dennis, 1987. "Hedonic Prices and Implicit Markets: Estimating Demand and Supply Functions for Differentiated Products," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 59-80, February.
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