Panel Paper: The Economic Value of Crime Control: A Large Investment on Police Infrastructure in Colombia

Thursday, November 7, 2019
Plaza Building: Lobby Level, Director's Row H (Sheraton Denver Downtown)

*Names in bold indicate Presenter

Miguel Morales-Mosquera, University of Chicago

What is the willingness to pay to reduce exposure to crime? Applying a research design based on the openings and closings of police stations in different cities in Colombia, I study the effects of public safety improvements on crime and its economic benefits. In particular, I quantify the relationship between a reduction in violent and non-violent offenses and the change in the prices of nearby residential properties. By estimating the economic benefits of crime reduction and understanding the spatial distribution of crime, better policy interventions can be proposed.

I leverage in the quasi-experimental variation generated by a large-scale police-infrastructure policy in Colombia and employ a novel identification strategy in order to better understand the relationship among three key variables: policing, crime displacement and willingness to pay for safety. Colombia started with the community policing program in the late 80s and as a part of the program more than 300 police station where build in the largest cities. This is one of the largest and ambitious investments in police-infrastructure in the world. By exploiting the variation generated by the location and inauguration time of these police stations, I estimate a reduced form model to study the effects of more policing on geolocated crime within cities, and how these changes translate onto welfare. Main results show that observable police reduce crime, in particular, robberies and personal injuries respond more to observable police while homicides do not. In general, the effects are very localized, with no appreciable impact outside the narrow area in which the police stations were built. The event study shows that crime starts to reduce after the first year the station opens.

This paper contributes to the literature on policing, crime and property values, but also methodologically adds to the literature that measures the value of non-market goods.