Mar 18, 2014

Economic growth reduces crime against small and medium sized enterprises in developing countries

Asif Islam in a paper that examines the link between economic growth and crime against firms in developing countries (Feb 2014): 
This paper contributes to the literature by examining the relationship between economic growth and crime against firms, a fairly under-researched area especially with regards to small and medium sized firms. The paper finds a negative relationship between firm losses due to crime and economic growth. We find that an increase in real GDP per capita growth by 1 percent is associated with a 0.30 percent reduction in the losses due to crime as a percentage of total sales experienced by firms. This figure is larger for small and medium firms (0.33 percent) than larger firms (0.21 percent). The suggested mechanism for this effect is that economic growth increases opportunities elsewhere and thus increasing the opportunity cost of crime. Furthermore, economic growth may result in small and medium firms growing faster and increasing performance, thus allowing them to better protect themselves from criminal activity. The results of this study are consistent with the literature that finds similar beneficial effects of economic growth on crime experienced by households.
HT: Jacob A. Jordaan

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