PPA786: Urban Policy

PPA786: Urban Policy
Class 21: Key Issues in Studying Urban Crime

PPA786, Class 21: Urban Crime Class Outline Introduction Crime Statistics The Economics of Crime Links to Earlier Topics The Impact of Housing on Crime The Impact of Crime on Housing The Impact of Jobs on Crime The Impact of Crime on Jobs

PPA786, Class 21: Urban Crime Crime Statistics The FBI website (www.fbi.gov) provides easy access to crime and victimization statistics. The main lesson: Crime rates have been falling steadily for the last 30 years or so (after increasing in the 1980s). Another lesson: Some of the most profound racial/ethnic disparities in the nation appear in the criminal justice system and in victimization rates.

PPA786, Class 21: Urban Crime

PPA786, Class 21: Urban Crime The Economics of Crime Some crime, especially violent crime, obviously has an irrational element. But scholars have found that much of the variation in crime can be found by thinking about the costs and benefits of crime for potential criminals (= everyone!) For more, see the reading from O’Sullivan and the articles it cites.

PPA786, Class 21: Urban Crime Examples of the Costs of Crime There is some probability that a criminal will get caught—and costs, such as fines, incarceration, injury, or limited future job possibilities—if one does get caught. Time spent in criminal activities has an opportunity cost, namely, lost wages; this cost is low with high unemployment and low skills. Criminal activity may cause anxiety or alienate friends or relatives.

PPA786, Class 21: Urban Crime Examples of the Benefits of Crime Criminal activity may be lucrative (with some probability). Criminal activity may yield social status in some neighborhoods—at least with some people.

PPA786, Class 21: Urban Crime Supply = Demand The amount of crime in a community depends on the distribution of rewards from various crimes (the benefits or demand curve) And the distribution of costs (the supply curve). Equilibrium crime is where the marginal benefit from one more crime equals the costs. Policy makers attempt to shift these curves (e.g. by reducing unemployment) to reduce crime.

PPA786, Class 21: Urban Crime The Impact of Housing on Crime: Lead Earlier in the class we saw that old housing, which is concentrated in central cities, sometimes has lead paint, now banned; when children ingest it, they literally lose intelligence and become more aggressive. Lower IQ lowers the opportunity cost of crime. Aggressive behavior is associated with violent crime.

PPA786, Class 21: Urban Crime The Impact of Housing on Crime: Lead, 2 Lead also used to be in gasoline and was emitted in exhaust; so high congestion places, again big cities, had the highest concentrations of lead in the air—leading to the same types of problems. The housing market is involved here because high congestion is a neighborhood disamenity and low-income people sort into low-quality neighborhoods.

PPA786, Class 21: Urban Crime The Impact of Housing on Crime: Lead, 3 A study by Reyes (2007) looked at the impact of removing lead from gasoline on violent crime. Her paper contains a lot of information about the impact of exposure to lead on behavior. Her methodology is very good. Even though lead was removed from gasoline at the same time in every state due to the Clean Air Act, the change in lead exposure was different in different states because each state has a different mix of gasoline grades. So she uses state fixed effects and state level changes in lead in gasoline.

PPA786, Class 21: Urban Crime The Impact of Housing on Crime: Lead, 4 Reyes finds “a significant and robust relationship between lead exposure in childhood and violent crime rates later in life. The estimates indicate that the reduction in lead exposure in the 1970s is responsible for a 56% drop in violent crime in the 1990s and will likely produce further declines in the future, up to a 70% drop in violent crime by the year 2020.” “Moreover, the social value of the reductions in violent crime far exceeds the cost of the removal of lead from gasoline.”

PPA786, Class 21: Urban Crime The Impact of Crime on Housing Several recent studies show that people are willing to pay a lot more for housing in low-crime neighborhoods than in high-crime neighborhoods. Ihlanfeldt and Mayock find that in the Miami area, “the elasticities of house value with respect to aggravated assault crime and robbery crime are −.152 and −.111, respectively.” I find that in Cleveland, people pay 20% more to be at least ½ mile from one of the city’s 3 crime “hot spots,” which have high violent and property crime.

PPA786, Class 21: Urban Crime The Impact of Crime on Housing, 2 Crime also affects sorting, of course. High-crime neighborhoods are not desirable. An economics graduate student, Alex Bogin, uses data from Mecklenberg, NC to estimate the impact on house values of a nearby homicide; he finds that “homes sold within 500 feet of a homicide fall by roughly 14.4% in the year following the crime.” This difference then fades. He also finds that this impact is larger in low-crime than in high-crime neighborhoods. This is consistent with sorting, because people willing to pay the most to avoid crime sort into low-crime neighborhoods.

PPA786, Class 21: Urban Crime The Impact of Jobs on Crime As pointed out earlier, some people are driven to crime because the expected returns to criminal activity are higher than the expected returns to work in the regular labor market. Hence, a lack of job opportunities (high unemployment, low wages) leads more people to choose crime.

PPA786, Class 21: Urban Crime The Impact of Jobs on Crime, 2 A study by Gould, Weinberg, and Mustard (ReStat 2001) looks at this link. “From 1979 to 1997, the wages of unskilled men fell by 20%, and, despite declines after 1993, the property and violent crime rates(adjusted for changes in demographic characteristics) increased by 21% and 35%, respectively.” They find that “the wage trends explain more than 50% of the increase in both the property and violent crime indices over the sample period.”

PPA786, Class 21: Urban Crime The Impact of Crime on Jobs Another important effect is that people with a criminal record have a much more difficult time finding a job. The posted reading by Pager, Western, and Sugie shows this with employment audits (which were discussed in an earlier class). The posted Raphael reading reviews many more studies on this topic.

PPA786, Class 21: Urban Crime The Impact of Crime on Jobs, 2 (Pager et al.)

PPA786, Class 21: Urban Crime The Impact of Crime on Jobs, 3 A related effect concerns the location of business (see the posted article by Rosenthal and Ross). R&R find that crime affects firm sorting. The firms they look at (in retail, wholesale, and restaurants) tend to be in census tracts with higher rates of violent crime and motor vehicle theft. An increase in violent crime and motor vehicle theft leads to less retail activity. More violent crime during prime dinner hours lowers the concentration of high-end restaurants.

PPA786, Class 21: Urban Crime The Impact of Crime on Jobs, 4--Policy The Center for Employment Opportunities (CEO) Transitional Jobs Program was designed to help former prisoners. CEO provides temporary, paid jobs and other services in an effort to improve participants’ labor market prospects and reduce the odds that they will return to prison. It was evaluated by MDRC using a random-assignment design. See http://www.mdrc.org/publications/616/overview.html

PPA786, Class 21: Urban Crime The Impact of Crime on Jobs, 5—Policy (MDRC) CEO substantially increased employment early in the follow-up period but he effects faded over time. The initial increase in employment was due to the temporary jobs provided by the program. CEO significantly reduced recidivism, with the most promising impacts occurring among a subgroup of former prisoners who enrolled shortly after release from prison. These program group members were less likely than their control group counterparts to be arrested, convicted of a new crime, and reincarcerated. CEO’s impacts were stronger for those who were more disadvantaged or at higher risk of recidivism when they enrolled in the study. CEO’s financial benefits outweighed its costs, largely due to reduced criminal justice system expenditures.

PPA786, Class 21: Urban Crime The Impact of Crime on Jobs, 6—Policy (NYT on CEO) MDRC has evaluated five such programs, and none of the others had any effect on recidivism. This matters. Nationally, two-thirds of all released prisoners are rearrested within three years. C.E.O.’s program produced benefits of between $1.26 and $3.85 per dollar spent; it saved society $4,900 per participant. The savings came mainly in incarceration averted, but it also considers the value the participants contribute at their work sites. For the recently released — the target group for the intervention — it saved $8,300 per person. Opinionator column by T. Rosenberg, March 28, 2012.

PPA786, Class 21: Urban Crime The Impact of Crime on Jobs, 7—Policy (NYT on CEO) C.E.O.’s program looks a lot like other transitional jobs programs — except for one thing: At C.E.O., the clients are not dropped into a regular workplace, but organized into work crews. Although most of the time, felons are not allowed to have contact with other felons, the parole system makes exceptions for programs like these. The men work together, eat lunch together, take coffee breaks together. They are closely supervised by people who served time himself. “We’ll never know for sure why C.E.O.’s results are different,” said D. Bloom of MDRC. “We think there may be some kind of peer effect. The other programs don’t have the same feeling of a bunch of guys who have just been through the same thing with a supervisor who also has been through the same thing. They are all together in a positive environment and getting motivation coaching.”

PPA786: Urban Policy