The Impact of Violence on Neighborhood Business Activity

Robert Greenbaum, The Ohio State University
George Tita, University of California, Irvine

ABSTRACT
This paper investigates the impact of violent crime on neighborhood business activity. We treat homicide incidents as a disamenity for business location decisions as we more broadly investigate the impact of violence on non-victims. Urban violence imposes a cost on non-victims by causing them to alter their routine activities. The patterns of where people live, work and shop reveal their utility-maximizing choices given the transportation costs they face. If a localized increase in violent crime causes them to alter the location of these activities, this implies a cost to both the individual and the affected businesses. As businesses react to the changing location preferences of their workers and customers, the businesses undergo adjustment costs to change their locations. The paper looks for evidence of these costs by examining the impact of homicide increases on local business district activity.

We combine geo-coded homicide data from five cities over ten years with a longitudinal data set containing all business establishments in these cities to determine whether localized surges in homicide activity have an impact on neighborhood business districts. If people tend to shop near where they live, then changes in these types of business activities will reflect household migration decisions. Abandonment of residential areas following violence outbreaks will also make it more difficult for these businesses to recruit employees since many jobs in this sector do not pay enough to compensate workers for a long commute.

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Updated 05/20/2006