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Tiebout and security: how crime and fear of crime affect the Flemish municipalities' local income tax capacity

Carine Smolders (UGent) , Junior Burssens (UGent) and Stijn Goeminne (UGent)
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Abstract
Despite the extensive literature on the relation between crime and migration, not much is known at this point about how crime affects the tax capacity of local communities. This holds especially for rural communities as studies generally focus on urban flight. In this paper we empirically investigate whether the Flemish local income tax base is sensitive to changes in the local level of insecurity. The underlying assumption is that insecurity drives out white, wealthy and educated citizens and keeps such citizens from other communities from moving into that locality. The poor, unemployed, elderly citizens are more likely to stay, as migration implies moving costs that might be considerable. This may result in income sorting and, consequently, lead to changes in the tax base of the local communities. We test a model containing several proxies for the local level of insecurity (objective as well as subjective measures) using panel data for 272 Flemish municipalities covering the period 2003-2009. The impact of crime and fear of crime on local income tax revenues is investigated. In addition, the effects on the income distribution and the efflux of citizens are estimated. Next to the local crime rate, insecurity in surrounding communities is taken into account. In addition, the analysis contains proxies to control for the socio-demographic context, for the labor market and for the housing market. Finally, the local government‟s policy concerning safety in the police zone is taken into account. Regressions were run separately for 40 small cities and for 232 other communities. The results show that income composition changes. Crimehas a depressing effect on average per capita income in the small cities, but does not affect the tax capacity. As crime does not affect the delocalization of citizens, the significant negative effect must be related to the new citizens. The results suggest that in cities struggling with crime, less wealthy people are attracted to rent a place. More wealthy renters are not interested in renting in the city due to the crime levels.Those that decide to buy a house in the city are to be situated in the higher income deciles, given the high level of housing prices. This more wealthy influx seems to compensate for the depressing effect from crime in the community on the income basis, as in the end the tax base seems to be immune for crime. As for the other communities, we see a deviant pattern. Theft and extortion seem to be the reason to move away from a community. Property crimes result within the same year in a decreasing average income per capita. Theft and extortion influence the income level in a community with a delay of 2 years. However, the effects disappear in the tax revenue regression. Neither reported crimes, nor fear of crime seems to change tax capacity in the other municipalities. Contrary to small cities, insecurity in surrounding municipalities significantly increases the tax base. Localities facing increasing levels of crime in the neighboring communities become an attractive haven for the citizens moving out of those communities.
Keywords
migration, crime, local taxes, Tiebout mobility

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Chicago
Smolders, Carine, Junior Burssens, and Stijn Goeminne. 2012. “Tiebout and Security: How Crime and Fear of Crime Affect the Flemish Municipalities’ Local Income Tax Capacity.” In 58th Annual North American Meetings of the Regional Science Association International, Proceedings.
APA
Smolders, C., Burssens, J., & Goeminne, S. (2012). Tiebout and security: how crime and fear of crime affect the Flemish municipalities’ local income tax capacity. 58th Annual North American Meetings of the Regional Science Association International, Proceedings. Presented at the 58th Annual North American Meetings of the Regional Science Association International.
Vancouver
1.
Smolders C, Burssens J, Goeminne S. Tiebout and security: how crime and fear of crime affect the Flemish municipalities’ local income tax capacity. 58th Annual North American Meetings of the Regional Science Association International, Proceedings. 2012.
MLA
Smolders, Carine, Junior Burssens, and Stijn Goeminne. “Tiebout and Security: How Crime and Fear of Crime Affect the Flemish Municipalities’ Local Income Tax Capacity.” 58th Annual North American Meetings of the Regional Science Association International, Proceedings. 2012. Print.
@inproceedings{3053002,
  abstract     = {Despite the extensive literature on the relation between crime and migration, not much is known at this point about how crime affects the tax capacity of local communities. This holds especially for rural communities as studies generally focus on urban flight. In this paper we empirically investigate whether the Flemish local income tax base is sensitive to changes in the local level of insecurity. The underlying assumption is that insecurity drives out white, wealthy and educated citizens and keeps such citizens from other communities from moving into that locality. The poor, unemployed, elderly citizens are more likely to stay, as migration implies moving costs that might be considerable. This may result in income sorting and, consequently, lead to changes in the tax base of the local communities. We test a model containing several proxies for the local level of insecurity (objective as well as subjective measures) using panel data for 272 Flemish municipalities covering the period 2003-2009. The impact of crime and fear of crime on local income tax revenues is investigated. In addition, the effects on the income distribution and the efflux of citizens are estimated. Next to the local crime rate, insecurity in surrounding communities is taken into account. In addition, the analysis contains proxies to control for the socio-demographic context, for the labor market and for the housing market. Finally, the local government\unmatched{201f}s policy concerning safety in the police zone is taken into account. Regressions were run separately for 40 small cities and for 232 other communities. The results show that income composition changes. Crimehas a depressing effect on average per capita income in the small cities, but does not affect the tax capacity. As crime does not affect the delocalization of citizens, the significant negative effect must be related to the new citizens. The results suggest that in cities struggling with crime, less wealthy people are attracted to rent a place. More wealthy renters are not interested in renting in the city due to the crime levels.Those that decide to buy a house in the city are to be situated in the higher income deciles, given the high level of housing prices. This more wealthy influx seems to compensate for the depressing effect from crime in the community on the income basis, as in the end the tax base seems to be immune for crime. As for the other communities, we see a deviant pattern. Theft and extortion seem to be the reason to move away from a community. Property crimes result within the same year in a decreasing average income per capita. Theft and extortion influence the income level in a community with a delay of 2 years. However, the effects disappear in the tax revenue regression. Neither reported crimes, nor fear of crime seems to change tax capacity in the other municipalities. Contrary to small cities, insecurity in surrounding municipalities significantly increases the tax base. Localities facing increasing levels of crime in the neighboring communities become an attractive haven for the citizens moving out of those communities.},
  author       = {Smolders, Carine and Burssens, Junior and Goeminne, Stijn},
  booktitle    = {58th Annual North American Meetings of the Regional Science Association International, Proceedings},
  language     = {eng},
  location     = {Ottowa, Canada},
  pages        = {17},
  title        = {Tiebout and security: how crime and fear of crime affect the Flemish municipalities' local income tax capacity},
  year         = {2012},
}