In a previous post, I had talked about problems due to power outages faced by retailers in India using Enterprise Survey’s data on 1,948 retail stores. I provided evidence showing that losses due to power outages (as a % of the annual sales of stores) and hours of power outage in a typical month were much higher for low-income lagging states compared with more developed leading states in India.
The retail and wholesale sector in India is among the biggest in the country, yet it receives little attention from policy makers and researchers. The sector accounts for about 14% of India’s GDP and over a quarter of the value added in all services sectors. It is the second largest employer (after agriculture), providing over 10% of all formal jobs in the country.
In previous posts, I discussed the crime and security situation for firms in Latin America and the Eastern Europe and Central Asia (ECA) region. I have begun rolling data from the Enterprise Surveys for 21 countries in Africa, and the initial results suggest that crime imposes as heavy a burden on firms in Africa as in Latin America. On average, losses due to crime and security expenses average about 2.7% of the annual sales of a firm in Africa.
One might think that firms in low-income countries suffer more crime-related problems than those higher up the development ladder. Low income levels, higher unemployment and the haphazard development of urban centers in low-income countries might contribute positively to crime. Consequently, losses due to crime and expenses on security incurred by firms may be higher in these countries.
Not another reference to recession-hit corporate behemoths, but more on how to jump start even small businesses in the toughest environments. Somalia and Zimbabwe top the list in the latest Failed States Index from the Fund for Peace and Foreign Policy magazine. The problems facing those attempting to do business there are well documented.
What are the sorts of firms that are most prone to crime? The question is important to properly understand how crime affects economic activity and how to direct crime prevention efforts across different target groups. I use firm-level data from twenty nine countries in the East Europe and Central Asia region (Business Environment and Enterprise Performance Survey (BEEPS), 2009) to explore the question.
At first you might guess that it’s the big firms that make an easy target. But we need to do more than guess—the policy implications are quite different if the answer is “big” or “small.” If large firms are more efficient and do more R&D and export to other countries, then crime can be more harmful to the economy when directed against such firms. However, compared with large firms, wages and profits may be lower in the smaller firms. Crime directed against small firms can therefore be regressive (causing more harm to the relatively worse-off).
If you wanted to start a business in India, what city would you pick? The just-released report Doing Business in India 2009 has an answer: Ludhiana. Hyderabad and Bhubaneshwar would also be good choices. Why? These were ranked as the top three cities in India (out of 17 included in the ranking) in the overall ease of doing business.