Unlocking Amenities: Estimating Public Good Complementarity

David Albouy, Peter Christensen and Ignacio Sarmiento

Journal of Public Economics, February 2020, 182, 104-110

Abstract:

Public goods may exhibit complementarities that are essential for determining their individual value. Our results indicate that improving safety near parks can turn them from public bads to goods. Ignoring complementarities may lead to i) undervaluing the potential value of public goods; ii) overestimating heterogeneity in preferences; and iii) understating the value of public goods to minority households. Recent reductions in crime have “unlocked” almost $7 billion in property value in Chicago, New York and Philadelphia. Still, two-fifths of the potential value of park proximity, $10 billion, remains locked-in.