The effects of local infrastructure investment on crime

Abstract

This paper examines how a nationwide infrastructure investment policy, implemented at the local level, impacted local crime rates. The policy, developed in the wake of the global recession of 2008-09, was designed to boost local economies through job creation. Using monthly figures from the more than 900 municipalities making up the Spanish region of Catalonia, the paper exploits spatial and temporal variations in the Spanish Ministry of Public Administration's random approval of local investment policies, to estimate their impact on both unemployment and crime. The combination of difference-in-differences and IV estimates makes it possible to assess both the size and timing of the policy's impact on the local labor market and on municipal-level crime rates. While the policy did little to palliate the effects of the economic recession in the long run, local public finances did experience a short-term boost, resulting in a temporary reduction in local unemployment rates (as required by the policy), as well as a significant drop in crime rates.