Economic impact of security threats

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Crime and terrorism are a major part of every European society. The types of costs and economic effects of crime and terrorism are widely varied and will be referred to as economic impact of security threats.


Urban areas (cities in particular) traditionally try to control crime levels and terrorist threats. The economic rationale behind this is that in case the population of urban areas increasingly feel unsafe, they will more and more retreat themselves from public life, causing a negative economic spiral caused by a decrease in public tax income resulting in a decrease in public facilities making cities less and less attractive to live in (causing everybody who can afford it to move outside the cities as what happened in cities like London and Amsterdam in the seventies of the twentieth century). In sum, the economic impact of security threats (crime & terrorism) is mostly negative due to the direct damage to buildings, infrastructure, and population. In addition, crime and terrorism cause negative indirect economic effects that could end up in negative economic spirals as mentioned above.

  • The costs and effects of crime touch just about everyone to some degree. The ultimate cost of crime is the loss of life, but other major costs to victims of crime include medical costs, property losses, and loss of income.
  • After a big terrorist event, one can read frequently about the economic damage of the event on the local economy such as after the London Bombings in 2005 or the September 11 attacks in New York. Due to the significant costs and effects of terrorism, knowledge about this theme is of major relevance for any urban planner.

Put differently, the economic impact of security threats (crime & terrorism) can be significant and explains why economists and related scholars increasingly analysed the economic impact of crime and terrorism.

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Groups of economic impact of security threats

It is important to realise for urban planners that crime and terrorism do not only lead to direct (primary) material and immaterial costs (such as loss of property, medical and health case costs, victim support, etc.), but also to costs in response to crime (e.g. police, prosecution, court proceedings) and costs in anticipation of crime (security, insurance)[1]. On top of that, crime and terrorism also generate less tangible costs that are not easy to be identified, but can be of major importance for the local economy (the so called secondary economic effects). This will be further explained on the specific pages (see above).

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Footnotes and references

  1. The costs in anticipation of, as a consequence of, and in response to crime are all primary economic effects.