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"Captive Markets" : the impact of kidnappings on corporative investment in Colombia / Rony Pshisva, Gustavo A. Suárez

By: Pshisva, Rony [autor].
Contributor(s): Suárez, Gustavo A [autor].
Series: Documentos CEDE ; N°56.Publisher: Bogotá : Universidad de los Andes, ©2005Description: 51 páginas : ilustraciones, mapas, tablas ; 28 cm.Content type: Media type: Carrier type: Contained works: Universidad de los Andes. Facultad de Economía - CEDE [autor].Subject(s): Conflicto armado | Incineracion | Inversiones -- Toma de decisiones | Secuestro -- Aspectos económicos -- 1996-2002 -- Colombia | Violencia -- Aspectos socioeconómicos -- ColombiaDDC classification: 332.67322861 Abstract: This paper measures the impact of crime on firm investment by exploiting variation in kidnappings in Colombia from 1996 to 2002. Our central result is that firms invest less when kidnappings target firms. We also find that aggregate crime rates-homicides, guerrilla attacks, and general kidnappings-have no significant effect on investment. This finding alleviates concerns that our main result may be driven by unobserved variables that explain both overall criminal activity and investment. Furthermore, kidnappings that target firms reduce not only the investment of firms that sell in local markets, but also the investment of firms that sell in foreign markets. Thus, an unobservable correlation between poor demand conditions and criminal activity is unlikely to explain the negative impact of firm-related kidnappings on investment. Our results are consistent with the hypothesis that managers are reluctant to invest when their freedom and life are at risk; however, we cannot completely discard alternative explanations.
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Item type Current location Collection Call number Vol info Copy number Status Date due Barcode Item holds
Book Book B. Campus los Cerros
Colección general
Colección general 332.67322861 P958 (Browse shelf) 2005 1 Available 0000002601
Total holds: 0

Incluye apéndice y bibliografía. -- Apéndice 1. Croos-country evidence: investment and international kidnappings. -- Apéndice tabla 1. Cross-country evidence. -- Tabla 2. Department and industry variables: data drescription.

This paper measures the impact of crime on firm investment by exploiting variation in kidnappings in Colombia from 1996 to 2002. Our central result is that firms invest less when kidnappings target firms. We also find that aggregate crime rates-homicides, guerrilla attacks, and general kidnappings-have no significant effect on investment. This finding alleviates concerns that our main result may be driven by unobserved variables that explain both overall criminal activity and investment. Furthermore, kidnappings that target firms reduce not only the investment of firms that sell in local markets, but also the investment of firms that sell in foreign markets. Thus, an unobservable correlation between poor demand conditions and criminal activity is unlikely to explain the negative impact of firm-related kidnappings on investment. Our results are consistent with the hypothesis that managers are reluctant to invest when their freedom and life are at risk; however, we cannot completely discard alternative explanations.

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