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American Economic Review: Vol. 101 No. 3 (May 2011)

AER Volume. 101, Issue 3 | Previous ArticleNext Article

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

Article Citation

Bishop, Kelly C., and Alvin D. Murphy. 2011. "Estimating the Willingness to Pay to Avoid Violent Crime: A Dynamic Approach." American Economic Review, 101(3): 625-29.

DOI: 10.1257/aer.101.3.625

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.

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Authors

Bishop, Kelly C. (Washington U in St Louis)
Murphy, Alvin D. (Washington U in St Louis)

JEL Classifications

D12: Consumer Economics: Empirical Analysis
K42: Illegal Behavior and the Enforcement of Law
R23: Urban, Rural, and Regional Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics