Is Murder Bad for Business? Evidence from Colombia

52 Pages Posted: 13 Nov 2015 Last revised: 16 Oct 2018

See all articles by Sandra Rozo

Sandra Rozo

University of Southern California - Marshall School of Business; University of Southern California - Schaeffer Center for Health Policy and Economics

Date Written: January 23, 2017

Abstract

This article studies the effects of violent crime (measured through homicide rates) on market prices and size using plant-level panel data in Colombia. To estimate causal effects, I exploit reductions in violence driven by increases in security expenditures during Uribe's presidency; these resulted in greater violence reductions in municipalities that voted for Uribe in the elections of 2002 and 2006. I find that firms that face higher violence also face lower output and input prices. Output prices fall more than the prices of inputs, which drives firms to reduce production and some firms exit the market. Workers see reductions in their real income.

Keywords: violent crime, prices, market size

JEL Classification: D6, J31, O12

Suggested Citation

Rozo, Sandra, Is Murder Bad for Business? Evidence from Colombia (January 23, 2017). Available at SSRN: https://ssrn.com/abstract=2690075 or http://dx.doi.org/10.2139/ssrn.2690075

Sandra Rozo (Contact Author)

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA California 90089
United States

HOME PAGE: http://www.sandravrozo.com

University of Southern California - Schaeffer Center for Health Policy and Economics ( email )

635 Downey Way
Los Angeles, CA 90089-3333
United States

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