Is Murder Bad for Business? Evidence from Colombia

This article studies the effects of violent crime (measured through homicide rates) on market prices and size using plant-level panel data in Colombia. To estimate causal effects, I exploit reductions in violence driven by increases in security expenditures during Uribe's presidency; these resulted in greater violence reductions in municipalities that voted for Uribe in the elections of 2002 and 2006. I find that firms that face higher violence also face lower output and input prices. Output prices fall more than the prices of inputs, which drives firms to reduce production and some firms exit the market. Workers see reductions in their real income