ABSTRACT
Economists generally prefer market-based approaches to estimating intangible costs – oftentimes called “revealed preferences” because costs are based on observable behavior of consumers. While there is no market for “crime,” many markets exist that have an impact on – or are impacted by crime. For example, homeowners purchase burglar alarms, guns, and expensive protective doors and locks to reduce the risk of burglary. To the extent home buyers take into account the risk of victimization when deciding whether or not to buy a home, we expect higher crime neighborhoods to have lower housing prices. Finally, to the extent workers choose occupations and jobs that are risky, competitive markets will compensate those workers for the added risk of injury or death on the job. In this Chapter, we examine the methodology and review studies that have attempted to infer the cost of crime from housing prices and wage rates.
