Crime, House Prices, and Inequality: The Effect of UPPs in Rio
48 Pages Posted: 31 Jan 2012
Date Written: January 1, 2012
We use a recent policy experiment in Rio de Janeiro, the installation of permanent police stations in low-income communities (or favelas), to quantify the relationship between a reduction in crime and the change in the prices of nearby residential real estate. Using a novel data set of detailed property prices from an online classifieds website, we find that the new police stations (called UPPs) had a substantial effect on the trajectory of property values and certain crime statistics since the beginning of the program in late 2008. We also find that the extent of inequality among residential prices decreased as a result of the policy. Both of these empirical observations are consistent with a dynamic model of property value in which historical crime rates have persistent effects on the price of real estate.
Keywords: wealth distribution, amenity value, real estate
JEL Classification: O18, O15, R30, K42
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