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The Economic Effects of the Baltimore Riots May Last Decades

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fireOf all the disheartening scenes of unrest coming out of Baltimore this week, few have been as dispiriting as the image of a church project that was set ablaze.

For the past eight years the Southern Baptist Church in East Baltimore has been working on a project that would provide a community center and low-income housing in the form of 60 senior-citizen apartments. The construction was expected to be completed in December. And last night it all burned to the ground.

Those associated with the project have remained optimistic. Kevin Bell, senior vice president of The Woda Group, vowed to rebuild and said, “This does not make us go away.” And Rev. Donte Hickman, the pastor of the church, says, “This fire is going to spark a revival.”

We should pray the project will soon be back on track and that the community as a whole will heal quickly. But we should also be aware of the long term impact that riots have on a city.

In 2004, the National Bureau of Economic Research (NBER) published two papers that examined the effect of the riots in the 1960s and early 1970s. From 1964 to 1971, as many as 700 riots erupted in cities across America. The large numbers of injuries, deaths, property damage that occurred in predominantly black neighborhoods caused considerable short-term damage on the communities. But the impact over the long run (from 1960 to 1980) was even more severe. According to the NBER,

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 because many low-wage black males were no longer engaged in full-time work, the authors note. The proportion of blacks living in high-poverty urban neighborhoods increased as well, and residential segregation led to increasingly poor socioeconomic outcomes among young blacks.

The research found a relative decline in median black family income of approximately 9 percent in cities that experienced severe riots relative to those that did not, controlling for several other relevant city characteristics. 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.

A second paper investigated the influence of riots on central city residential property values, especially black-owned properties:

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 percent for black-owned properties, and from 6 to 10 percent 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.

There is no clear causal mechanism that explains these dispiriting effects. But the authors of the study list some of the possible factors involved:

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.

Within a few weeks the riots in Baltimore will subside and the country’s attention will shift to other problems. But the economic damage caused by the violence and looting will affect the community for decades to come.

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Joe Carter Joe Carter is a Senior Editor at the Acton Institute. Joe also serves as an editor at the The Gospel Coalition, a communications specialist for the Ethics and Religious Liberty Commission of the Southern Baptist Convention, and as an adjunct professor of journalism at Patrick Henry College. He is the editor of the NIV Lifehacks Bible and co-author of How to Argue like Jesus: Learning Persuasion from History's Greatest Communicator (Crossway).

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