Do Police Reduce Crime? Estimates Using the Allocation of Police Forces After a Terrorist Attack By RAFAEL DI TELLA AND ERNESTO SCHARGRODSKY* An important challenge in the crime literature is to isolate causal effects of police on crime. Following a terrorist attack on the main Jewish center in Buenos Aires, Argentina, in July 1994, all Jewish institutions received police protection. Thus, this hideous event induced a geographical allocation of police forces that can be presumed exogenous in a crime regression. Using data on the location of car thefts before and after the attack, we find a large deterrent effect of observable police on crime. The effect is local, with no appreciable impact outside the narrow area in which the police are deployed. (JEL K42) Classical criminology assumes that criminals are rational beings who weigh the costs and benefits of their actions. Gary Becker (1968) produced the first fully fledged theory of crime based on rational behavior. His research led to an upsurge of interest in the economics of criminal behavior [see, for example, Isaac Ehrlich (1973), Ann Witte (1980), Ehrlich and George Brower (1987), James Andreoni (1991), Richard Freeman (1996), Steven Levitt (1997), Pablo Fajnzylber et al. (2000), inter alia]. One of the central predictions of Becker’s theory is that crime will decrease when police presence increases. A basic problem with this prediction is that it has largely failed to find empirical support. In a survey of the literature, Samuel Cameron (1988) reports that in 18 out of 22 papers surveyed researchers found either a positive effect of police presence on crime or no relationship between these variables. More recent surveys by Thomas Marvell and Carlisle Moody (1996) and John Eck and Edward Maguire (2000) reach similar conclusions. There is, however, a serious endogeneity problem with these studies that arises from the simultaneous determination of crime and police presence (see Franklin Fisher and Daniel Nagin,…