A Burning Question: Does Arson Increase When Local House Prices Decline?

28 Pages Posted: 6 Feb 2017

See all articles by Michael D. Eriksen

Michael D. Eriksen

University of Cincinnati - Department of Finance - Real Estate

James M. Carson

University of Georgia

Multiple version iconThere are 2 versions of this paper

Date Written: March 2017

Abstract

We construct panel data on house prices and the determined cause of 4.8 million individual fires in the United States between 1986 and 2010 to test whether decreases in local housing market prices coincided with increases in arson. Since some insured homeowners may attempt to disguise the actual cause of fire as accidental, we also examine how decreases in local house prices are associated with changes in the total number of fires and the probability of determined causes of accidental fires. For the sample period, our results suggest that declines in local house prices coincided with increases in arson, the total number of fires, and the probability that fires were determined to occur due to arson and misuse. We provide further support for the existence of such an effect with empirical evidence that the relation between declines in house prices and arson is stronger in states that allow mortgage lender recourse.

Suggested Citation

Eriksen, Michael D. and Carson, James M., A Burning Question: Does Arson Increase When Local House Prices Decline? (March 2017). Journal of Risk and Insurance, Vol. 84, Issue 1, pp. 7-34, 2017. Available at SSRN: https://ssrn.com/abstract=2911355 or http://dx.doi.org/10.1111/jori.12089

Michael D. Eriksen (Contact Author)

University of Cincinnati - Department of Finance - Real Estate ( email )

College of Business Administration
Cincinnati, OH 45221
United States

James M. Carson

University of Georgia ( email )

Athens, GA 30602-6254
United States

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