Stirring Up a Hornets' Nest : Geographic Distribution of Crime

This paper develops a model of the geographic distribution of crime in an urban area. Agents select their occupation, residence, consumption, and housing. The paper is the first to formally study how the location of crime, the residence of workers, and housing prices are affected by the spatial allocation of police protection. It examines two opposite strategies of police deployment: concentrated protection (the police only protect one area of the city) and dispersed protection (the police are evenly deployed across the city). In equilibrium, under concentrated protection, only rich agents are willing to pay the high housing prices in protected areas, while poor agents reside in high-crime areas. The city becomes segregated. Under dispersed protection, all areas of the city have the same income per capita and crime levels, and an integrated city emerges. Comparing these equilibria, crime is more likely to be higher under dispersed protection than concentrated protection when inequality is high, dispersing the police force significantly reduces its effectiveness, and the proportion of income that criminals extract from rich (poor) agents is high (low). Concentrated protection may induce higher aggregate welfare than dispersed protection, particularly when inequality is high. Unequal societies face a difficult dilemma in that concentrated protection maximizes aggregate welfare but exacerbates social disparities. Fortunately, there is a set of taxes and subsidies that can be employed to offset the disadvantages to agents left unprotected. Finally, this paper incorporates private security and shows that dispersed public protection does not necessarily lead to an integrated city equilibrium. Rich agents may use private security to endogenously isolate themselves in closed residential areas