Estimating the Cost of Crime Victimization: A Compensating Income Variation Approach Using Diferent Utility Proxies

The relationship between subjective well-being and fear of crime is well-evidenced, but the cost of crime victimization is relatively understudied. We estimate the monetary compensation needed to offset the change from non-victim to victim of burglary or assault, using the compensating income variation method on seven waves of data from the South African Social Attitude Survey conducted in 2009, 2010, 2011, 2015, 2016, 2017, and 2018. We explore the sensitivity of results to different model specifications and utility proxies, including the first-ever utilization of the personal well-being index in compensating income variation research. Results show that models using the personal well-being index have higher predictability, but they produce considerably higher willingness-to-pay or compensating income variation estimates than those using the general life satisfaction questions and the global happiness question. We find the willingness to pay to avoid suffering the consequences of burglary or assault to range between USD 1581 and USD 4242 per year for the average-income person. However, there is large heterogeneity in willingness-to-pay across income groups. The measured value of not suffering burglary or assault along with the high prevalence of victimization in South Africa highlights the substantial financial and societal impacts of crime and the urgent need for targeted policy interventions, particularly in contexts marked by significant income disparities.

Kiel Institute Expert