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The economic damage of rioting lingers for a long time

It is a tragic truth of the recent riots that the damage was worst in areas which were already relatively economically impoverished. Even worse, economic research suggests that the areas afflicted will suffer from the damage inflicted by rioters for years to come.

In a 2004 paper, economists William J. Collins and Robert A. Margo noted that:

Between 1964 and 1971, hundreds of riots erupted in American cities, resulting in large numbers of injuries, deaths, and arrests, as well as in considerable property damage concentrated in predominantly black neighborhoods. There have been few studies of an econometric nature that examine the impact of the riots on the economic status of African Americans, or on the cities in which the riots took.

Riots depressed income and employment in affected areas

Seeking to fill that gap, Collins and Margo looked at the effect of the riots on the labor market. They used “aggregate, city-level data on income, employment, unemployment, and the area’s racial composition from the published volumes of the federal censuses” and “individual-level census data from the Integrated Public Use Microdata Series”. 

Until 1975, the racial gap in average earnings among full-time male workers in the United States narrowed. There were periods of sharp convergence, as in the 1940s, alternating with periods of relative stasis, as in the 1950s and early 1960s. After 1970, racial convergence in earnings slowed markedly, in part. Collins and Margo note, because many low-wage black males were no longer engaged in full-time work. The proportion of blacks living in high-poverty urban neighborhoods increased also, and residential segregation led to increasingly poor socioeconomic outcomes among young blacks. Did the riots contribute to this downward economic spiral?

Although they characterize their estimates as “tentative,” controlling for several other relevant city characteristics, Collins and Margo find a relative decline in median black family income of approximately 9% in cities that experienced severe riots relative to those that did not. There is also some evidence of an adverse effect on adult male employment rates, particularly in the 1970s. Between 1960 and 1980, severe riot cities had relative declines in male employment rates of 4 to 7 percentage points. Individual-level data for the 1970s suggests that this decline was especially large for men under the age of 30. Collins and Margo conclude:

…that the riots had negative effects on blacks’ income and employment that were economically significant and that may have been larger in the long run (1960-1980) than in the short run (1960-1970).

Riots depressed property values in affected areas

But Collins and Margo found further evidence for the negative economic effects of riots in a second paper in 2004. This time, they used: 

…census data from 1950 to 1980 to measure the riots’ impact on the value of central-city residential property, and especially on black-owned property.

They find that the riots significantly depressed the median value of black-owned property between 1960 and 1970, with little or no rebound in the 1970s. The baseline estimates for severe-riot cities relative to small-or-no-riot cities range from approximately 14 to 20% for black-owned properties, and from 6 to 10% for all central-city residential properties. Household-level data for the 1970s indicate that the racial gap in property values widened substantially in riot-afflicted cities relative to others.

Those who reap the ‘benefits’ of rioting are not the same as those who bear the costs

How might the riots be responsible for these outcomes? The National Bureau of Economic Research suggests a number of ways:

Property risk might seem higher in central city neighborhoods than before the riots, causing insurance premiums to rise; taxes for income redistribution or more police and fire protection might increase, and municipal bonds may be more difficult to place; retail outlets might close; businesses and employment opportunities might relocate; middle and higher income households might move away; burned out buildings might be an eyesore; and so on. These damaging aspects of riots, the authors find, apparently outweighed outside assistance directed toward the riot areas in the wake of the disturbances.

The Minnesota Reformer reported in mid-July that:

At least 127 people are facing charges related to the unrest after Floyd’s death, according to a Reformer review of all unrest-related charges filed so far by the U.S. Attorney’s Office, Hennepin County, Ramsey County, the city of St. Paul and the city of Minneapolis. The vast majority of people charged are Minnesota residents — but fewer than half live in Minneapolis or St. Paul.

It might be fun for some people to travel to a riot, smash some stuff up, and head home thinking they have struck a blow for some cause or other. The evidence shows that it is those left behind who pay the costs.

John Phelan is an economist at the Center of the American Experiment. 

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