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AEC 2012 - Crime Self-Protection and Business Growth in Cote d'Ivoire

16-Oct-2012

Cote d’Ivoire was considered an island of stability and economic prosperity in a region of stagnation, and political turmoil. The situation was reversed in the early 2000, when a decade of instability is associated with poor economic performance. On the path of post-conflict reconstruction, the country faces surges in crime and violence, what will likely to challenge the dynamics of the private sector. The private sector is indeed the one that can lead this reconstruction by creating jobs and reducing the burden of poverty. Yet, very little is known about the effects of crime on private sector in Cote d’Ivoire even huge it may be important in the development of the business activities. Referring to a model on the relationship between, production function, level of crime and selfprotection, this paper tested empirically the impact of crime on business activity in Cote d’Ivoire. Using a recent World Bank enterprise survey dataset and a quasi-experimental methodology we controlled for the direction of effects of crime on profitability and investment. As predicted by our theoretical framework, we found a mixed effects of crime through the channel of private provision of security: self-protection increases the profitability of contracted firms while hampering their level of investment.

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