Gentrification and Crime: Identification Using the 1994 Northridge Earthquake in Los Angeles

Abstract

ABSTRACT:Theory suggests that in the long term, gentrification—which I define as the phenomenon where wealthier individuals move into lower-income areas—should decrease neighborhood crime. In the short term, however, anecdotal evidence indicates that gentrification actually increases crime, perhaps due to the relative difference in status between newcomers and existing residents, and to increased opportunities for criminal behavior. Further, consumers’ choice of residential location depends on crime rates, creating simultaneity that likely biases estimates that overlook this concern. I exploit the 1994 Northridge earthquake in Los Angeles and subsequent short-term government-sponsored home financing incentives as an instrument to control for this endogeneity. The exogenous event induced middle- and upper-income individuals to purchase homes in earthquake-affected low and moderate-income neighborhoods, which I argue is independent of the influence of crime. The results show that in the short term, gentrification increases assaults, robberies, automobile thefts, and thefts from automobiles.