Location, Location, and Pacification: The Effect of Crime Reduction on Residential Property Value

Federal Reserve Bank Of New York
Data de publicação: 

In this post, we document the relationship between crime and house prices in the city of Rio de Janeiro, Brazil. One fully expects crime, as a public “bad,” to exert a downward force on prices; indeed, this is a common finding in the literature on amenity valuation. Our recent study quantifying this relationship is novel in its: (i) use of extremely detailed property price data for a large number of neighborhoods, (ii) application to a developing economy, and (iii) examination of the link between crime and reduced house-price inequality. We focus on the extent to which prices are responsive to crime-related outcomes, as demonstrated by a recent policy experiment and with the use of detailed offer-price data from the online classified website ZAP (www.ZAP.com.br). We find that prices are quite sensitive to falling crime, which implies large welfare gains due to crime reduction.

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