Liquor stores are a common sight in many distressed neighborhoods. But does the presence of liquor stores actually cause crime and urban decay—as suggested by situational models of criminal activity—or are liquor stores more likely to open in declining neighborhoods? In the first chapter, I use administrative data on the locations of alcohol outlets in the city of Los Angeles, merged with detailed incident crime reports, to evaluate the effects of alcohol outlet openings and closings on local crime rates. I specify an event-study framework to measure the changes in violent and property crimes just after the opening and closing of outlets. Although both types of crime increase following an outlet opening, the overall impact of new outlet openings is driven by effects in low socioeconomic status (SES) neighborhoods: openings in high-SES neighborhoods only have small effects on property crime. Outlet closings have smaller impacts, on average, although there is some indication that the closing of an outlet in a low-SES neighborhood reduces crime.

The second chapter examines the relationship between alcohol outlets and property values. Merging the same administrative data on the locations of alcohol outlets used in the first chapter of this dissertation with detailed individual transaction records of all residential property sales between 1980 and 2000 in Los Angles, I apply the hedonic model for this analysis. I find that outlets located in low-SES neighborhoods are seen as a disamenity, whereas outlets located in high-SES neighborhoods are valued by homeowners. In addition, I also find that these outlets generally have a larger impact on properties located closer to them than those located further away. Overall, it appears that additional alcohol outlets—especially in lower-SES neighborhoods—contribute to both crime and urban decay.