NCJ Number
120806
Journal
American Journal of Economics and Sociology Volume: 47 Issue: 2 Dated: (April 1988) Pages: 177-193
Date Published
1988
Length
17 pages
Annotation
This analysis considers how circumstances such as crime and racial composition in surrounding communities can affect a household's utility and therefore play a role in the household's residential location decision.
Abstract
The theory of the household's valuation of neighborhood amenities is expanded, using a housing value equation, to show how the household's valuation of amenities is affected by amenities in surrounding areas. An empirical model using data from 71 suburban communities in the Chicago area is specified to measure the simultaneous interaction among housing values, crime, and police efforts. A revenue equation is also included to determine how the household's valuation of crime and racial composition affects the community's revenue-raising ability. Empirical results indicate that crime and racial composition in the household's community and in surrounding communities have a statistically significant effect on housing values. While the magnitude of the effect is small, the results indicate that households consider the crime rate and racial composition of surrounding communities as negative externalities. The results also suggest that an increased black presence in the community adversely affects housing values. 20 references, 3 tables.