Crime and Public Housing: A General Equilibrium Analysis

Abstract

I study the effect of the demolition of 22,000 units of public housing on crime in Chicago using an approach that is designed to capture general equilibrium spillovers. Point estimates that incorporate both the direct and spillover effect of the demolitions indicate that in the short run the average demolition increased city-wide crime by 0.5% per month relative to baseline, with no evidence of offsetting long run reductions. I also provide evidence that spillovers are mediated by demolition induced migration across gang territorial boundaries. These findings stand in contrast to earlier work purporting to show that demolitions caused reductions in aggregate crime. I reconcile my findings with the existing literature by proposing a test that is informative for the presence of control group contamination in difference in difference designs with many treatment periods. I apply the test and conclude that estimates from prior work are likely biassed by spillovers.