Imagine how much they'd pay not to live next to a politician….

How much less would the typical housebuyer pay for a home a few doors down from a convicted sex offender? About five grand, according to Leigh Linden and Jonah Rockoff.

There Goes the Neighborhood? Estimates of the Impact of Crime Risk on Property Values From Megan’s Laws
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 these 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 four percent on average (about $5,500) while those further away show no decline.  These results suggest that individuals have a significant distaste for living in close proximity to a known sex offender.  Using data on crimes committed by sexual offenders against neighbors, we estimate costs to victims of sexual offenses under the assumptions that all of the decline in property value is due to increased crime risk and that neighbors’ perceptions of risk are in line with objective data.  We estimate victimization costs of over $1 million–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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6 Responses to Imagine how much they'd pay not to live next to a politician….

  1. Patrick says:

    I hate to say it, being about as dry as they come myself, but the last sentence of that abstract is the kind of thing that really doesn’t enhance economists’ image!

    First, it is defective in logic, since the very fact that they are doing this research tells you what one cost ‘exclusive of crime risk‘ is. Secondly, it is defective in common sense because, as much as I support putting monetary values on crime for criminalcivil justice purposes, I strongly oppose the continued employment of anyone so unimaginative and stupid as to think that the costs estimated by the criminal justice literature, or indeed the civil justice system, are any sort of proxy for the market costs.

    NB: I don’t think they commit the gross error above, just that by laziness and lack of imagination they give the impression that they might. I’m sure that the text of the article contains just such a qualifier.

    PS: I do realise that this is just an abstract, and one can’t be perfect.

    PPS: I ought, I know, to have read the paper so as to judge better – I’ll read their paper if you write mine…

  2. Andrew Leigh says:

    Patrick, I don’t understand your first point at all (it’s probably obvious, but I didn’t get it).

    On your second point, I don’t begin from the assumption that jury awards and survey evidence on the costs of sexual assault are either too low or too high. I simply don’t know. So I find it interesting to discover that a revealed preference methodology produces a much bigger estimate.

  3. Patrick says:

    If I’ve written it, and you don’t get it, it is surely that I have not been clear!

    The point is that one ‘exclusive of crime risk‘ is lower housing values because of public perceptions – it is circular, people worrying that other people might want to pay less making them less willing to pay as much…but the fact that some economist thought to try and measure it is an excellent sign that it is a real ‘stigma’, as opposed to perceived risk of crime, effect.

    The second one is incontrovertible, surely – remember that I am not talking about objective criteria of jury awards, or vaguely objectively measurable cost in terms of psychiatric treatment, lost earnings, diminished enjoyment of life etc, but the purely subjective criteria of market transactions. Consider the crime ‘risked’ in this case – surely it hardly needs empirical study to conclude that the overwhelming majority of victims would not have ‘sold’ the right to the crime at any price? Let alone their parents, who are the people being measured here – in my case, at least, there simply wouldn’t be any sum of money that would persuade me to give up my right to batter you to a bloody pulp see you jailed and sue for however much you have.

    Finally, related to my first point is that surely most of this has less to do with percieved risk of crime than with ‘amenity’? As, er, your own title indicates? Ie the study is an almost complete furphy?

  4. Christine says:

    Interesting paper. I tried to skim it to figure out how much living 0.1 miles from a sex offender would raise the probability of being a victim, but couldn’t see it. I can’t believe it is really very much higher, and as the study points out the assumption there is crucial to their estimates. Plus I’m with Patrick on the idea that there’s a difference in how much I’d pay to avoid the crime/demand in order to be willing to subject myself to the crime (the estimated victimisation costs in this paper), and how much I think I could demand after the event (the legal payment).

    Presumably Megans Laws were meant to reduce the probability of neighbours (though not necessarily others?) being victimised – would be nice to know if there’s any evidence this worked.

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