Violent Crime and Firm Performance: Evidence from the Caribbean

Abstract Crime and growing the private sector are pertinent development challenges. Despite their importance there is a paucity of research on crime and business performance, particularly in developing countries, partly because of limited firm level data. This study used cross sectional firm data from the Productivity Technology Innovation survey (PROTEqIN) gathered in 2014 across 13 Caribbean countries to investigate violent crimes and company performance using Ordinary Least Squares regression, and several robustness checks including Instrumental Variables and Propensity Score Matching. The Caribbean provides an apt study given that a key characteristic of the business environment is high exposure to crime. The study found that firm sales and violent crime are negatively associated, even after firm characteristics, other factors which influence sales, and country and sector fixed effects were taken into account. The findings of this study underscore the importance for crime prevention, control and reduction policies to grow the private sector.