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Is Murder Bad for Business? Evidence from Colombia

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  • Sandra V. Rozo

    (USC Marshall School of Business)

Abstract

This paper studies the effects of violent crime 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 Álvaro Uribe’s presidency; these resulted in greater violence reductions in municipalities that voted for him in the 2002 elections as he was looking for reelection. 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.

Suggested Citation

  • Sandra V. Rozo, 2018. "Is Murder Bad for Business? Evidence from Colombia," The Review of Economics and Statistics, MIT Press, vol. 100(5), pages 769-782, December.
    • Handle: RePEc:tpr:restat:v:100:y:2018:i:5:p:769-782
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