Strip Clubs, 'Secondary Effects', and Residential Property Prices

32 Pages Posted: 17 Jul 2016

See all articles by Taggert J Brooks

Taggert J Brooks

University of Wisconsin - Department of Economics

Brad R. Humphreys

West Virginia University - Department of Economics

Adam Nowak

West Virginia University

Date Written: July 14, 2016

Abstract

The 'secondary effects' legal doctrine allows municipalities to zone, or otherwise regulate, sexually oriented businesses. Negative 'secondary effects' (economic externalities) justify limiting First Amendment protection of speech conducted inside strip clubs. One example of a secondary effect, cited in no fewer than four United States Supreme Court rulings, is the negative effect of strip clubs on the quality of the surrounding neighborhood. Little empirical evidence that strip clubs do, in fact, have a negative effect on the surrounding neighborhood exists. To the extent that changes in neighborhood quality are reflected by changes in property prices, property prices should decrease when a strip club opens up nearby. We estimate an augmented repeat sales regression model of housing prices to estimate the effect of strip clubs on nearby residential property prices. Using real estate transactions from King County, Washington, we test the hypothesis that strip clubs have a negative effect on surrounding residential property prices. We exploit the unique and unexpected termination of a 17 year moratorium on new strip club openings in order to generate exogenous variation in the operation of strip clubs. We find no statistical evidence that strip clubs have 'secondary effects' on nearby residential property prices.

Keywords: Sexually oriented business, secondary effects doctrine, repeat sales regression model

JEL Classification: K10, K23, R30, R38, R52

Suggested Citation

Brooks, Taggert J and Humphreys, Brad R. and Nowak, Adam, Strip Clubs, 'Secondary Effects', and Residential Property Prices (July 14, 2016). Available at SSRN: https://ssrn.com/abstract=2809807 or http://dx.doi.org/10.2139/ssrn.2809807

Taggert J Brooks

University of Wisconsin - Department of Economics ( email )

1725 State Street
La Crosse, WI 54601
United States
(608) 785-5295 (Phone)

HOME PAGE: http://www.uwlax.edu/BA/eco/faculty/faculty_brooks.htm

Brad R. Humphreys (Contact Author)

West Virginia University - Department of Economics ( email )

Morgantown, WV 26506
United States

Adam Nowak

West Virginia University ( email )

PO Box 6025
Morgantown, WV 26506
United States

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