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Does crime influence the merchants' preference for cash? Evidence from France

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  • Bruno Karoubi

    (ESC Rouen)

Abstract

This paper is an attempt to determine whether crime as an environmental factor has a significant impact on merchant preference for cash. I exploit a unique database from a representative sample of merchants and show that crime has a twofold impact on the merchant subjective preference for cash. I build an indicator composed of theft variables concerning primarily both consumers and merchants. I find that a merchant whose store is located in a department in which my indicator is high has Ceteris Paribus a lower than average preference for cash. I also find that a higher level of financial fraud increases it. The first effect is interpreted to be the result of a precaution motive (cash payment and storage involve risk of loss and theft), while the second results from adverse selection (cash payments make tax evasion easier).

Suggested Citation

  • Bruno Karoubi, 2012. "Does crime influence the merchants' preference for cash? Evidence from France," Economics Bulletin, AccessEcon, vol. 32(4), pages 3449-3459.
    • Handle: RePEc:ebl:ecbull:eb-12-00644
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    References listed on IDEAS

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    1. Geoffrey R. Gerdes & May X. Liu & Darrel W. Parke & Jack K. Walton, 2005. "Trends in the use of payment instruments in the United States," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), vol. 91(Spr), pages 180-201.
    2. Gabor Kezdi, 2005. "Robus Standard Error Estimation in Fixed-Effects Panel Models," Econometrics 0508018, University Library of Munich, Germany.
    3. Humphrey David & Willesson Magnus & Lindblom Ted & Bergendahl Göran, 2003. "What Does it Cost to Make a Payment?," Review of Network Economics, De Gruyter, vol. 2(2), pages 1-16, June.
    4. William J. Baumol, 1952. "The Transactions Demand for Cash: An Inventory Theoretic Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 66(4), pages 545-556.
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    Cited by:

    1. Bruno Karoubi & Régis Chenavaz & Corina Paraschiv, 2016. "Consumers’ perceived risk and hold and use of payment instruments," Applied Economics, Taylor & Francis Journals, vol. 48(14), pages 1317-1329, March.
    2. Franz Seitz & Lucas Devigne & Raymond de Pastor, 2022. "Different Motives for Holding Cash in France: an Analysis of the Net Cash Issues of the Banque de France," Working papers 888, Banque de France.
    3. Jacek Pietrucha & Grzegorz Maciejewski, 2020. "Precautionary Demand for Cash and Perceived Risk of Electronic Payments," Sustainability, MDPI, vol. 12(19), pages 1-25, September.

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    • E0 - Macroeconomics and Monetary Economics - - General

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