Estimating the Willingness to Pay to Avoid Violent Crime: A Dynamic Approach

Kelly Bishop and Alvin Murphy

American Economic Review, 2011, vol. 101, issue 3, 625-29

Abstract: The hedonic model, which has been used extensively in the Environmental, Urban, and Real Estate literatures, allows for the estimation of the implicit prices of housing and neighborhood attributes, as well as households' demand for these non-marketed amenities. A recognized drawback of the existing hedonic literature is that the models assume a myopic decision-maker. In this paper, we estimate a dynamic hedonic model and find that the average household is willing to pay $472 per year for a ten percent reduction in violent crime. In addition, we find that the traditional, myopic model suffers from a 21 percent negative bias.

Date: 2011
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