Alcohol Availability and Crime: Evidence from Census Tract Data

Abstract

Using census tract data from the city of Detroit and a reduced‐form crime equation, this article finds that alcohol availability is positively and significantly related to total, property, and violent crime rates and homicides. The elasticity of crime rates with respect to alcohol availability calculated in this study are 0.92, 0.82, 0.87, and 0.12 for total crime, violent crime, property crime, and homicide, respectively. These elasticities do not change qualitatively across estimation methods for the various measures of crime rates. I find that ordinary least squares estimates impart a downward bias to the effects alcohol availability has on crime rates. Failure to account for the endogeneity of alcohol outlets will therefore result in an underestimate of crime elasticities with respect to alcohol availability. The estimates imply that reducing alcohol availability may decrease crime rates and improve social welfare.