The impact of crime on the enterprise sector: Transition versus non-transition countries

The need to protect property rights and fight against crime and corruption continues to be an urgent task for authorities in many developing and transition countries. This paper identifies the factors explaining why some enterprises are more likely to be targeted by crime than others, and analyses the impact of crime on enterprise performance and behaviour in a simple modelling framework. The results of enterprise surveys conducted in 34 countries in Europe and Asia during 2002 and 2005 show that higher rates of crime are particularly associated with the weak development of micro enterprises in the services sector, operating in large countries with high unemployment. The paper also highlights the deterrent effect of crime on FDI inflows and job creation, especially in less advanced transition countries, providing empirical evidence to substantiate the importance of the fight against crime for economic development.