August 2015

IZA DP No. 9311: Victimisation, Wellbeing and Compensation: Using Panel Data to Estimate the Costs of Violent Crime

The costs of violent crime victimisation are often left to a judge, tribunal or jury to determine; leading to the potential for considerable subjectivity and variation. Using unique panel data, this paper provides compensation estimates that can help reduce the subjectivity of awards by giving a benchmark for the compensation required to offset direct and intangible costs. First, individual-area fixed-effects models allowing for adaptation to crime are estimated to assess the effects of violent crime victimisation on diverse measures of wellbeing. These results are then subsequently used to calculate the monetary compensation required to offset the wellbeing losses. Estimates allowing for the endogeneity of income suggest that A$88,000 is required to compensate the average crime victim. We find some evidence that compensation estimates are larger if the wellbeing losses of female family members are considered, and are larger for females if the perpetrator of the crime is a stranger rather than a partner, friend or relative.