The Long Run Effects of de jure Discrimination in the Credit Market: How Redlining Increased Crime

How Redlining Increased Crime (JMP)

How Redlining Increased Crime (Including Los Angeles Analysis)

How Redlining Increased Crime (Appendix)

Abstract: The welfare costs of crime are disproportionately borne by individuals living in predominately African-American or Hispanic neighborhoods. This paper uses two regression discontinuity designs to show that Federal housing policies established in the wake of the Great Depression make present-day contributions both to this inequity in the distribution of crime within cities and to the overall volume of crime in a city. To stabilize housing markets in the 1930’s, a newly formed Federal agency constructed maps of 239 US cities; these maps purported to grade neighborhoods in terms of lending risk, the riskiest neighborhoods being labeled in red and colloquially said to have been “redlined”.  Redlined neighborhoods faced decades of reduced credit access relative to neighborhoods assigned higher grades.  First, I use a regression discontinuity design that relies on an unannounced population cutoff used to determined which cities were redline-mapped to show that redline-mapping has increased present day city-level crime.  Secondly, I use a spatial regression discontinuity design to show that the neighborhood color-assignments made in the late 1930’s causally influence the present day distribution of crime across neighborhoods in Los Angeles, California.  Lastly, I provide evidence increases in city-level racial segregation and decreases in educational attainment are important channels through which redlining increased present day crime.