Is Gun Violence Stunting Business Growth?

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November 3, 2016
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Is Gun Violence Stunting Business Growth?

November 3, 2016

Gun violence imposes heavy social, psychological, and financial burdens on both individuals and society at large. Some of these burdens are known—we learn of the emotional cost from news stories and moving personal accounts, and we have previously calculated the health care costs of treating gunshot injuries. But we know comparatively little about the relationship between gun violence and local economic health.

In the communities and neighborhoods most affected by gun violence, is the presence of guns—absent other factors—impeding business growth?

A recent longitudinal study shows that neighborhood-level economic activity affects the conditions that make crime more likely and that violent crime can decline in the same year that economic activity increases. Earlier studies by Bowes and Greenbaum and Tita show that crime and fear of crime adversely affect the economic health of communities, cutting into business revenues and limiting business activity. New Urban research led by Yasemin Irvin-Erickson builds on these findings by exploring the association between gun violence and economic health of neighborhoods in six cities: Baton Rouge, Louisiana; Minneapolis, Minnesota; Oakland, California; Rochester, New York; San Francisco, California; and Washington, DC.

This study integrates innovative data from several sources, including the National Establishment Time-Series (NETS) database, gunshot detection technology, and credit bureau data, to develop concrete numbers describing the association between gun violence and local economic health. An interim report presents findings from Oakland, Washington, DC, and Minneapolis and explores the association between gun violence and business trends by census tract, using fixed effects panel models and analysis of observational data with statistical matching.

City profiles

Employment Growth versus Homicide Rate in Three Cities

 

Sources: Gun homicide incident data were acquired from the Metropolitan Police Department of the District of Columbia, the Minneapolis Police Department, and the Oakland Police Department. Growth rates are calculated with data from the National Establishment Time-Series database.

Minneapolis

Minneapolis, where gun homicides stayed roughly level from 2010 to 2012 and mirrored the national rate, provides a valuable comparison point for other cities. Although gun violence levels remained steady during this period, NETS data show the city employment increased, from 208,000 to 224,000 in retail and service businesses and from 347,000 to 352,000 across all categories.1 Growth in Minneapolis outpaced that of Oakland, where gun homicides increased over the same period, but fell short of Washington, DC, where gun homicides decreased.

Washington, DC

Gun homicides in Washington, DC, decreased from 2010 to 2012, with 2012 marking the first time in three years the city had a gun homicide rate lower than the national average. NETS data from 2011 to 2012 show the number of employees increased from 484,000 to 497,000 in retail and service businesses and from 850,000 to 1 million across all categories.

Oakland

Gun homicides increased in Oakland from 2010 to 2012, reaching roughly 28 homicides annually per 100,000 people (more than 2.5 times the national rate for 2012). NETS data from 2011 to 2012 show the number of employees in Oakland fell from 125,000 to 115,000 in retail and service businesses and from 210,000 to 205,000 across all categories.

The map below overlays Oakland’s census tract neighborhoods with gun homicide data from 2011 and employment growth data from 2011 to 2012. Tracts highlighted in magenta experienced the most gun homicides. The tabs alternate between employment growth in retail and service businesses and growth across all business categories. The two pockets of the city with the most gun homicides were also areas of low employment growth, despite being surrounded by areas of relatively moderate growth.

Employment Growth in Oakland, CA, 2011–12

 

Sources: Gun homicide data were acquired from the Oakland Police Department. Growth rates are calculated with data from the National Establishment Time-Series database.

Notes: Census tracts are categorized based on the mean employment growth rate and standard deviations above the mean. The mean employment growth rates for all businesses and retail and service businesses were -0.024 (-2.4 percent) and -0.049 (-4.9 percent), respectively. Tracts colored light blue experienced growth rates below the mean. Tracts colored dark blue experienced growth rates greater than two standard deviations above the mean. All other census tracts experienced relatively moderate growth rates ranging from the mean to two standard deviations above the mean.

Findings from regression analyses

Preliminary findings yield data that demonstrate an intuitive yet striking relationship between gun homicides and economic activity at the neighborhood level, controlling for both the year and census tract effects.

In Oakland, each additional homicide in a census tract was significantly associated with five fewer job opportunities among contracting businesses (businesses losing employees) the next year. In Minneapolis, one less homicide in a census tract was significantly associated with the creation of 80 jobs and an additional $9.4 million in sales across all businesses the following year. A subset analysis of census tracts across all three cities that experienced a surge in homicides in 2011, controlling for existing levels of violence, found that these surges were significantly associated with an increase in contracting businesses.

In Washington, DC, each additional homicide in a census tract in a given year was significantly associated with two fewer retail and service businesses the next year. For census tracts with available gunshot detection technology data, every 10 fewer incidents of gunfire in a census tract were significantly related to one new business opening, the creation of 20 jobs in new businesses, $1.3 million more in sales at new businesses, and one fewer business closure.

Neighborhood-level data and their implications

Data from Minneapolis show that stable levels of gun violence can coincide with some business growth, but growth may be lower than in cities where levels of gun violence are in decline. And although employment numbers may increase at the city level, neighborhood-level data reveal that an increase in gun violence is accompanied by decreases in number of establishments, sales, and employment in local businesses. Ongoing analysis shows that these data can provide much-needed nuance for describing the relationship between gun violence and economic health at the community level.

If gun violence is affecting employment, its impact may extend beyond individual communities. When considered nationwide, gun violence could be a key factor in continuing cycles of poverty; it may also slow small business growth, discourage creation of new small businesses and investment in communities, and cause overall economic growth to stagnate. These effects would be most apparent in unevenly developed urban areas, where regional or citywide crime statistics may hide pockets of crime and disadvantage in certain neighborhoods.

What comes next?

This study joins previous research in making the case to consider gun safety from a local economic perspective. We must consider safety and welfare not only in the traditional sense, but in terms of creating an environment conducive to investment and growth.

Employment is just one indicator of local economic health. New regional data on loans and credit allow us to explore the relationship between gun violence and other indicators, such as delinquent mortgages and home sales as well as credit health by census tract. That analysis will be supplemented by interviews with residents, business owners, and other stakeholders in neighborhoods with high levels of gun violence.

A final report from the Justice Policy Center will be released in early 2017.

1 The NETS database covers all businesses, including sole proprietors and the self-employed. The database does not differentiate between full- and part-time employees. Further, it counts owners as employees, so a sole proprietor with three employees is captured as a four-employee business (as opposed to a three-employee business in Bureau of Labor Statistics data).


About This Project

This report was funded by Everytown for Gun Safety Support Fund, Inc. 

As an organization, the Urban Institute does not take positions on issues, but it does empower and support its experts in sharing their own evidence-based views and policy recommendations that have been shaped by scholarship.

Copyright © Urban Institute 2016. Read our terms of service here. View this project on Github.


Project credits

Research: Yasemin Irvin-Erickson, Bing Bai, Annie Gurvis, and Edward Mohr

Writing: Nicole Weissman

Design and Visuals: Vivian Hou

Editorial: Daniel Matos and Serena Lei


Photo by Joshua Lott/Getty Images

 

As an organization, the Urban Institute does not take positions on issues. Experts are independent and empowered to share their evidence-based views and recommendations shaped by research.

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