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.
However, the Business Environment and Enterprise Performance Survey (Enterprise Surveys – BEEPS 2009), a firm-level survey conducted in 29 countries in Eastern Europe and Central Asia, suggests that there is no correlation between crime and income levels. The percentage of firms that experienced one or more incident of crime during the survey year (2008-09) equaled 19% in the poorest 50% of the countries and 22.3% in the rest. Similarly, the percentage of firms that spent on security equaled 57.7% in the low-income countries and 55% in the high-income countries. These differences are not statistically significant.
The figure below shows similar findings for losses to firms from crime and their expenses on security (as % of their annual sales and averaged over all firms in the country). There is a negative relationship between security expenses and income level, but this relationship is weak and entirely driven by two countries, Kyrgyz Republic (KGZ) and the former Yugoslav Republic of Macedonia (MKD). Losses due to crime are positively correlated with income levels, although this relationship is too weak to make any inference with a reasonable degree of confidence.
In short, explaining the differences across countries in terms of crime and security for firms requires going beyond overall development measures such as per capita income.
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