The Price of Fear : Estimating the economic effect of fear of crimeusing sold apartments in Stockholm, Sweden

Sammanfattning: Fear of crime may differ between areas, even if levels of crime do not differ. Policymakers and companies should be interested in how much economical values individuals put on their emotions. No previous paper has tried to estimate the economic consequences of the kind of fear of crime that does not stem from an increase in crime. Through a hedonic fixed effect-approach and a unique data set, I close this gap by estimating the willingness to pay to avoid that fear. As the outcome variable, I use sold apartments in Stockholm municipality in the years 2017 and 2020. I find suggestive evidence of small to moderate effect of fear of crime on housing prices, even after controlling for crime levels, with an elasticity of -2% to -6%. The results are robust throughout different robustness tests. These findings may help politicians in their cost-benefit analyses when planning safety-increasing projects.