Shooting up liquidity: the effect of crime on real estate

Alexander Dentler and Enzo Rossi

No 2021-20, Working Papers from Swiss National Bank

Abstract: We combine real estate data with various types of crime data using time and geospatial information to detect discontinuities in transaction densities and pricing around crime events in Rochester, NY. Discontinuities in transaction densities invalidate causal inference for price responses implied by the regression discontinuity design (RDD) approach. However, these discontinuities also capture the liquidity response to crimes and, together with the commonly emphasized price response, provide a richer picture of how crime affects housing valuation. A calibrated match-and-bargain model reveals that house valuations decrease between 6% and 25% after a crime, depending on the type of crime. These predictions are manifolds of the estimated effect on prices documented in this paper and in the literature. The welfare effects of crime are not uniform across market participants and can elicit considerable disappointment to uninformed buyers that move into a high-crime neighborhood.

Keywords: Crime; real estate; liquidity effects; density discontinuity (search for similar items in EconPapers)
JEL-codes: C31 R21 R23 R30 (search for similar items in EconPapers)
Pages: 81 pages
Date: 2021
New Economics Papers: this item is included in nep-law and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.snb.ch/en/publications/research/workin ... orking_paper_2021_20 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:snb:snbwpa:2021-20

Access Statistics for this paper

More papers in Working Papers from Swiss National Bank Contact information at EDIRC.
Bibliographic data for series maintained by Enzo Rossi ().