Gentrification and crime

Low-income and high-income agents compete for space in an inner city, which has more crime but better access. The spatial equilibrium is characterized by income mixing, a result of the assumption that agents differ in the marginal disutility of travel time. Gentrification, defined as the displacement of low-income households, results from a decrease in crime or an increase in the frequency of travel to the center. Changes in the income mix are self-reinforcing because the crime rate is increasing in the number of low-income agents, and the prices of local goods are decreasing in the population of the relevant group (the Starbucks effect). A case study of Portland, Oregon provides an example of gentrification in the 1990s.