Federal Dposit InsuranceCorporation• Center for Financial Researchh
Sanjiv R. Das
Darrell Duffie
Nikunj Kapadia
Risk-Based Capital Standards,
Deposit Insurance and Procyclicality
Risk-Based Capital Standards,
Deposit Insurance and Procyclicality
FDIC Center for Financial Research
Working Paper
No. 2010-05
Do Foreclosures Increase Crime?
May 2010
Empirical Comparisons and Implied Recovery Rates
kkk
An Empirical
An Empirical Analysis
State-
Efraim Benmel Efraim Benmelech May, 2005
June 20
May , 2005 Asset S2005-14
September 2005
Sanjiv R. Das
Darrell Duffie
Nikunj Kapadia
Risk-Based Capital Standards,
Deposit Insurance and Procyclicality
Risk-Based Capital Standards,
Deposit Insurance and Procyclicality
FDIC Center for Financial Research
Working Paper
No. 2010-05
Do Foreclosures Increase Crime?
May 2010
Empirical Comparisons and Implied Recovery Rates
kkk
An Empirical
An Empirical Analysis
State-
Efraim Benmel Efraim Benmelech May, 2005
June 20
May , 2005 Asset S2005-14
September 2005
Do Foreclosures Increase Crime?
Ryan M. Goodstein* and Yan Y. Lee†
May 2010
Abstract
Among the policy concerns associated with increased foreclosures is an
increase in neighborhood crime. We propose that foreclosures increase
crime by decreasing informal policing by residents, an aspect of crime
deterrence little explored in the empirical economics literature. We
investigate the effect of foreclosures on crime using a national county-level
panel dataset covering the period 2002 to 2007. Employing an instrumental
variables strategy to correct for measurement error in foreclosure rates, we
find robust evidence that foreclosures increase burglary. A one percentage
point increase in foreclosure rates is estimated to increase burglary rates by
10.1 percent. Sensitive to sample period, we also find positive effects on
larceny and on aggravated assault. Our estimates indicate that the recent
spike in foreclosure activity will result in associated community-wide
burglary costs of at least $4.6 billion, and of at least $17.4 billion when
considering the impact on all types of crime.
Key Words: Crime, Foreclosures, Instrumental Variables
JEL Code(s): K42
* Financial Economist, Federal Deposit Insurance Corporation. Email: rgoodstein@fdic.gov. Telephone: 202.898.6863.
† Corresponding Author. Senior Financial Economist, FDIC. 550 17 th Street NW, Washington DC 20429. Email:
ylee@fdic.gov. Telephone: 202.898.6629. The authors are thankful for comments and suggestions from Paul Kupiec,
Paul Hanouna, Stefan Jacewitz, Carlos Ra mirez, and participants of the FDIC’s Center for Financial Research Seminar
Series, the American Real Estate and Urban Economics Association 2009 International Conference, the Association for
Public Policy Analysis and Management 2009 Fall Research Conference, and the 2010 Allied Social Science Association
Annual Meeting. The conclusions in this paper are those of the authors and do not reflect the views of the FDIC.
Ryan M. Goodstein* and Yan Y. Lee†
May 2010
Abstract
Among the policy concerns associated with increased foreclosures is an
increase in neighborhood crime. We propose that foreclosures increase
crime by decreasing informal policing by residents, an aspect of crime
deterrence little explored in the empirical economics literature. We
investigate the effect of foreclosures on crime using a national county-level
panel dataset covering the period 2002 to 2007. Employing an instrumental
variables strategy to correct for measurement error in foreclosure rates, we
find robust evidence that foreclosures increase burglary. A one percentage
point increase in foreclosure rates is estimated to increase burglary rates by
10.1 percent. Sensitive to sample period, we also find positive effects on
larceny and on aggravated assault. Our estimates indicate that the recent
spike in foreclosure activity will result in associated community-wide
burglary costs of at least $4.6 billion, and of at least $17.4 billion when
considering the impact on all types of crime.
Key Words: Crime, Foreclosures, Instrumental Variables
JEL Code(s): K42
* Financial Economist, Federal Deposit Insurance Corporation. Email: rgoodstein@fdic.gov. Telephone: 202.898.6863.
† Corresponding Author. Senior Financial Economist, FDIC. 550 17 th Street NW, Washington DC 20429. Email:
ylee@fdic.gov. Telephone: 202.898.6629. The authors are thankful for comments and suggestions from Paul Kupiec,
Paul Hanouna, Stefan Jacewitz, Carlos Ra mirez, and participants of the FDIC’s Center for Financial Research Seminar
Series, the American Real Estate and Urban Economics Association 2009 International Conference, the Association for
Public Policy Analysis and Management 2009 Fall Research Conference, and the 2010 Allied Social Science Association
Annual Meeting. The conclusions in this paper are those of the authors and do not reflect the views of the FDIC.