Crime, House Prices, and Inequality: The Effect of UPPs in Rio

48 Pages Posted: 31 Jan 2012

See all articles by Claudio Frischtak

Claudio Frischtak

Inter.B Consultoria Internacional de Negócios

Benjamin R. Mandel

Federal Reserve Bank of New York

Date Written: January 1, 2012

Abstract

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

Suggested Citation

Frischtak, Claudio and Mandel, Benjamin R., Crime, House Prices, and Inequality: The Effect of UPPs in Rio (January 1, 2012). Available at SSRN: https://ssrn.com/abstract=1995795 or http://dx.doi.org/10.2139/ssrn.1995795

Claudio Frischtak

Inter.B Consultoria Internacional de Negócios ( email )

Rio de Janiero
Brazil

Benjamin R. Mandel (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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