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.
One feature of the data that stands out is the high level of crime in the construction industry. Table 1 (below the jump) shows that close to 30% of the firms in construction faced at least one incident of crime during the survey year (2008-09). The figure is much lower for service firms (21.3%) and manufacturing firms (13.8%). Losses due to crime as a percentage of firm’s annual sales are also higher in construction (0.62%) relative to manufacturing (0.34%) and also service firms (0.51%). The difference in losses from crime between service and construction firms does not appear to be that big in Table 1, but this is largely due to 3-4 service firms that report very high levels of losses due to crime.
Looking at individual countries, Figure 1 reveals that in 19 out of the 29 countries, the incidence of crime is highest for the construction industry. For example, in the Czech Republic, 68% of the construction firms were victims of crime compared with 38% of service and 23% of manufacturing firms. Losses due to crime as a percentage of annual sales are highest in the construction sector for 15 out of 29 countries, for manufacturing in 4 countries and in 10 countries for service firms (Figure 2).
Interestingly, there is not much difference in the percentage of firms spending on security across the three industries (Table 1). Also, such expenses (as a percentage of of firms’ annual sales) are least for construction firms (Table 1). It might be tempting to conclude that construction firms face more crime because they spend less on security, but such a conclusion must await a rigorous analysis of the security-crime relationship. For one, the negative security-crime relationship is not supported by the comparison between manufacturing and service firms (Table 1). Further, construction sites are usually in public areas, which might be easy targets for criminals.