Measuring Positive Externalities from Unobservable Victim Precaution: An Empirical Analysis of Lojack
Private expenditures on crime reduction have potentially important externalities. Observable measures such as barbed-wire fences and deadbolt locks may shift crime to those who are unprotected, imposing a negative externality. Unobservable precautions, on the other hand, may provide positive externalities since criminals cannot determine a priori who is protected. Focusing on one specific form of victim precaution, Lojack, we provide the first thorough empirical analysis of the magnitude of such externalities. Because installing Lojack does not reduce the likelihood that an individual car will be stolen, any decrease in the aggregate crime rates due to Lojack is an externality from the perspective of the individual Lojack purchaser. We find that the presence of Lojack is associated with a sharp fall in auto theft in central cities and a more modest decline in the remainder of the state. Rates of other crimes do not change appreciably. Our estimates suggest that, at least historically, the marginal social benefit of an additional unit of Lojack has been as much as 15 times greater than the marginal social cost in high crime areas. Those who install Lojack in their cars, however, obtain less than ten percent of the total social benefits of Lojack, causing Lojack to be undersupplied by the free market. Current insurance subsidies for the installation of Lojack appear to be well below the socially optimal level.
|Date of creation:||Feb 1997|
|Date of revision:|
|Publication status:||published as Quarterly Journal of Economics, Vol. 108, no. 1 (February 1998): 43-|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
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.:
- Steven D. Levitt, 1995.
"Using Electoral Cycles in Police Hiring to Estimate the Effect of Policeon Crime,"
NBER Working Papers
4991, National Bureau of Economic Research, Inc.
- Levitt, Steven D, 1997. "Using Electoral Cycles in Police Hiring to Estimate the Effect of Police on Crime," American Economic Review, American Economic Association, vol. 87(3), pages 270-90, June.
- Gary S. Becker, 1968.
"Crime and Punishment: An Economic Approach,"
Journal of Political Economy,
University of Chicago Press, vol. 76, pages 169.
- Ben-Shahar, Omri & Harel, Alon, 1995. "Blaming the Victim: Optimal Incentives for Private Precautions against Crime," Journal of Law, Economics and Organization, Oxford University Press, vol. 11(2), pages 434-55, October.
- de Meza, David & Gould, J R, 1992. "The Social Efficiency of Private Decisions to Enforce Property Rights," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 561-80, June.
- Richard B. Freeman, 1996.
"Why Do So Many Young American Men Commit Crimes and What Might We Do about It?,"
Journal of Economic Perspectives,
American Economic Association, vol. 10(1), pages 25-42, Winter.
- Richard B. Freeman, 1996. "Why Do So Many Young American Men Commit Crimes and What Might We Do About It?," NBER Working Papers 5451, National Bureau of Economic Research, Inc.
- Laband, David N & Sophocleus, John P, 1992. "An Estimate of Resource Expenditures on Transfer Activity in the United States," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 959-83, August.
- Clotfelter, Charles T., 1978. "Private security and the public safety," Journal of Urban Economics, Elsevier, vol. 5(3), pages 388-402, July.
- Steven Shavell, 1990. "Individual Precautions to Prevent Theft: Private Versus Socially OptimalBehavior," NBER Working Papers 3560, National Bureau of Economic Research, Inc.
- Hui-Wen, Koo & Png, I. P. L., 1994. "Private security: Deterrent or diversion?," International Review of Law and Economics, Elsevier, vol. 14(1), pages 87-101, March.
- Cameron, Samuel, 1988. "The Economics of Crime Deterrence: A Survey of Theory and Evidence," Kyklos, Wiley Blackwell, vol. 41(2), pages 301-23.
- Black, Dan A & Nagin, Daniel S, 1998. "Do Right-to-Carry Laws Deter Violent Crime?," The Journal of Legal Studies, University of Chicago Press, vol. 27(1), pages 209-19, January.
- Philipson, Tomas J & Posner, Richard A, 1996. "The Economic Epidemiology of Crime," Journal of Law and Economics, University of Chicago Press, vol. 39(2), pages 405-33, October.
- Shavell, Steven, 1991. "Individual precautions to prevent theft: Private versus socially optimal behavior," International Review of Law and Economics, Elsevier, vol. 11(2), pages 123-132, September.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:5928. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.