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The economic costs of insecurity on businesses in Mexico: A general equilibrium perspective

Author

Listed:
  • Joana Cecilia Chapa

    (Universidad Autonoma de Nuevo Leon)

  • Edgardo Arturo Ayala

    (Tecnologico de Monterrey)

  • Sandra Edith Medellin

    (Tecnologico de Monterrey)

Abstract

To assess the economic losses for households and firms produced by crime to business in Mexico. A general equilibrium model of Mexico is built. The costs of business insecurity are introduced as a combination of sales and capital taxes. The rates were calibrated with the Enterprise Survey of the World Bank. The loss for insecurity on business in Mexico is in the order of 4 to 5 percent of the GDP. The modeling does not consider the dynamics of the process nor the cost of insecurity in the primary sector. It is found that if firms can shift the crime tax forward, the household losses become equivalent to a proportional tax. To the extent that firms shift the tax backwards, especially to capital, crime functions as a progressive tax. Business insecurity has significant consequences on the Mexican economy.

Suggested Citation

  • Joana Cecilia Chapa & Edgardo Arturo Ayala & Sandra Edith Medellin, 2023. "The economic costs of insecurity on businesses in Mexico: A general equilibrium perspective," EconoQuantum, Revista de Economia y Finanzas, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., vol. 20(1), pages 83-99, Enero-Jun.
    • Handle: RePEc:qua:journl:v:20:y:2023:i:1:p:83-99
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    More about this item

    Keywords

    Crime; Insecurity costs; General equilibrium models; Mexico.;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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