Is crime in Mexico a disamenity? Evidence from a hedonic valuation approach

Since Roback’s seminal work (J Polit Econ 90(6):1257–1278, 1982), the literature on hedonic prices has evaluated the role of amenities in equilibrating regional differentials in nominal wages and prices. While these studies generally find evidence for traditional amenities and disamenities in developed countries, there remains little research on how characteristics such as violence affect the equilibrium in less developed countries. This article explores violence and other local characteristics as an amenity or disamenity for Mexico and employs the hedonic wage and rent theory proposed by Roback. This research uses a multilevel estimation technique using data from the Mexican Household Income and Expenditure Survey, along with other information from the municipal and state levels. This article finds evidence to suggest that illegal earning opportunities outweigh crime disamenity by inhabitants of some traditional drug-trafficking regions, because such crime appears to be the modus vivendi in those regions in a way that does not reduce economic performance.