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The impact of crime on foreign direct investment

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  • Muhammad Mukhlis Afriyanto

    (Postgraduate Program in Economics, Universitas Indonesia, Jakarta, Indonesia.)

Abstract

This study examines the impact of crime incidence on Foreign Direct Investment (FDI) in Indonesian provinces. This study uses panel data covering 31 provinces for the period 2005 to 2015. We involve Total Crime, Property Crime, Violence, Vandalism, Arson, Fraud, Homicides and Kidnapping as variable of crime. The results show that crime variables have significant impact on FDI. We find that for every increase in total crime incidence per 100,000 people by ten percent, FDI is expected to decrease by approximately 0.95 percent. The results of this study suggest that besides boosting economic growth, stimulating infrastructure development, and lowering the provincial minimum wages, government needs to pay attention to crime incidence in each province. Government should allocate adequate resources to minimize the crime rate.

Suggested Citation

  • Muhammad Mukhlis Afriyanto, 2017. "The impact of crime on foreign direct investment," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 9(2), pages 189-198, April.
    • Handle: RePEc:uii:journl:v:9:y:2017:i:2:p:189-198
    DOI: 10.20885/ejem.vol9.iss2.art8
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    References listed on IDEAS

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    1. Bee Wah Tan & Chor Foon Tang, 2016. "Examining the Causal Linkages among Domestic Investment, FDI, Trade, Interest Rate and Economic Growth in ASEAN-5 Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 6(1), pages 214-220.
    2. Daniele, Vittorio & Marani, Ugo, 2011. "Organized crime, the quality of local institutions and FDI in Italy: A panel data analysis," European Journal of Political Economy, Elsevier, vol. 27(1), pages 132-142, March.
    3. Giuseppe Albanese & Giuseppe Marinelli, 2013. "Organized Crime and Productivity: Evidence from Firm-Level Data," Rivista italiana degli economisti, Società editrice il Mulino, issue 3, pages 367-394.
    4. Ashby, Nathan J. & Ramos, Miguel A., 2013. "Foreign direct investment and industry response to organized crime: The Mexican case," European Journal of Political Economy, Elsevier, vol. 30(C), pages 80-91.
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    Cited by:

    1. Leward Jeke & Tafadzwa Chitenderu & Clement Moyo, 2021. "Crime and Economic Development in South Africa: A Panel Data Analysis," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(2), pages 424-438.

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    More about this item

    Keywords

    foreign direct investment; crime; panel data; fraud.;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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