An urban overhead? Crime, agglomeration, and amenity.

We study the effects of crime and agglomeration on the value of urban amenities using data for 134 locations in New Zealand and report three key findings. First, the negative effects of crime operate mostly via rents, with elasticities that range from − 0.15 to − 0.44. Accounting for endogeneity leads to larger elasticities in most specifications, possibly due to sorting effects. Second, crime has negative effects on the value of urban amenities, with elasticities that range from approximately − 0.03 to − 0.06 for firms and − 0.02 to − 0.09 for workers. Using reduced-form models, we show that these effects imply an elasticity of population with respect to crime of − 0.04 to − 0.10. Third, controlling for crime causes estimates of agglomeration economies to increase by approximately 0.01–0.02 points, on average. Our findings confirm that crime is an important urban congestion cost that erodes productivity and well-being. • Uses a location choice model to analyse the effects of crime and agglomeration on the value of urban amenity via rents and wages. • Finds crime has significant negative effects on rents and – by extension – urban amenities, agglomeration economies, and population. • Results confirm that crime is a significant urban congestion cost that erodes productivity and well-being. [ABSTRACT FROM AUTHOR]