Difference between revisions of "Economic effects of crime"
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| + | [[Category:Economic]][[Category:Safety]] |
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| − | = Economic effects of crime = |
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| + | Crime imposes huge [[Economic impact|economic effects]] on European societies. These '''economic effects of crime''' are, in essence, a category of [[Economic impact|economic impact]]. |
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| − | Crime imposes huge economic effects on European societies. These economic effects are, in essence, the opposite of the positive economic effects of urban development (or spatial development). The successful burglary of a dwelling house or commercial building, for example, will not only lead to the loss of goods, but also affects (accumulated) the local, regional (and sometimes even national) economy through the decrease of property value and direct investments, uncertainty and fear of crime. This relationship is illustrated below: |
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| + | ==Description== |
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| − | [[File:Economics_impact_of_crime_2.jpg]]<br /> |
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| + | Crime not only leads to material and immaterial costs for those who have become victimised, but crime also forces local and national authorities to spend billions on the prevention of crime and the detection, prosecution and punishment of criminals. For the Netherlands, for example, the costs of crime are estimated to be 20.2 billion euro in 2005<ref name=SEO>SEO (2007): De kosten van criminaliteit [The cost of crime]. Publication Number: 971.</ref>, approximately 4.1 percent of the GDP. The British Home office researchers Brand and Price (2000)<ref name=Brand>Brand, S. and R. Price (2000): The economic and social costs of crime. Home Office Research Study 217.</ref> estimate the costs of crime to be between £35 and £60 billion per year for England and Wales. |
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| − | ''Figure: Illustration of relationship between crime, the urban object and society'' |
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| + | The identification and the [[Estimation of the costs of crime|estimation of the costs of crime]] have received broad attention in economic literature and research, but the economic effect(s) and impact of crime on society is still an underexposed field of interest. One important reason of this lack of studies is that it is very difficult to quantify the costs of crime with the help of [[Economic tools|economic tools]], and especially the benefits since they are in most of the cases non-economic, e.g. health benefits, the benefits of living in a safe area, etc. Moreover, while economic analysis (such as [[Social cost-benefit analysis|social cost-benefit analysis]]) is common in many contexts, the results depend largely on the used methodologies, including the underlying assumptions and measured effects.<ref>For example: How does one economically quantify the reputation of local police with regards to enforcing safety?</ref>. Nevertheless, the fact remains that there is an economic impact related to crime (in both a direct and indirect way). |
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| − | ==Why the costs of crime should be considered by urban planners?== |
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| − | As mentioned above, considerable costs are incurred in relation to crime. Crime not only leads to material and immaterial costs for those who have become victimized, but crime also forces local and national authorities to spend billions on the prevention, detection, persecution and punishment of criminals. For the Netherlands, for example, the costs of crime are estimated to be 20.2 billion euro in 2005<ref>SEO (2007).''De kosten van criminialiteit''.</ref>, approximately 4.1 percent of the GDP. Brand and Price (2000)<ref>Brand, S. and R. Price (2000). ''The economic and social costs of crime''. Home Office Research Study 217.</ref> estimate the costs of crime to be between £35 and £60 billion per year for England and Wales. |
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| + | Crime is a major part of every urban society, but it is not always as relevant for urban planners (e.g. cyber crime). In order to help the urban planner decide when the costs of crime should be considered, the Securipedia pages on [[urban object|urban objects]] do not just address the economic function of urban objects, but also the economic dimension of the more specific security threats. |
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| − | The [[Estimation of the costs of crime|identification and the estimation of the costs of crime]] have received broad attention in economic literature and research, but the economic effect(s) and impact of crime on society is still an underexposed field of interest. |
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| − | == |
+ | ==Types of costs and economic effects of crime== |
| − | Economists use various definitions and terminology for |
+ | Economists use various definitions and terminology for categorising the economic impact of crime. The two main categories (used in Securipedia) are the primary and secondary economic impact of crime, also referred to as direct and indirect economic effects<ref>Primary economic impact (or direct effects) are generally defined as the initial, immediate economic output generated by a specific cause (in this case a criminal offence). Secondary economic impact (or indirect effects) are generated each time a subsequent transaction is made, for example, the impact of crime on the real estate value in the neighbourhood.</ref>. |
| + | This relationship is illustrated below in the clickable map: |
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| − | === Primary economic effects of crime === |
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| + | <imagemap> |
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| − | Economists use in general two types of methods to further categorize the (primary) costs of crime<ref>Brand, S. and R. Price (2000). ''The economic and social costs of crime''. Home Office Research Study 217.</ref>. The first way is by defining the subject who bears the effects (victim, potential victims, society etc.). A second approach of categorizing is by breaking down the costs in relation to individual incidents (Davidson, 1999<ref>DAvidson, N. (1999). Costing Burglary Reduction, in Brand, S. and R. Price (2000).''The economic and social costs of crime''. Home Office Research Study 217.</ref>). So, one defines the costs: |
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| + | Image:Economic_impact_crime_v2.jpg|600px |
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| − | # in '''anticipation of crime''': mainly costs of precaution measures to avoid crime such as locks, alarm prevention programs and surveillance. |
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| − | # as a '''consequence of crime''': for instance, loss of property, medical and health care costs, victim support etc. |
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| − | # Costs '''in response to crime''': costs considering police, prosecution, court proceedings, sanctions etc. The identification and the estimation of the costs of crime is undertaken by several scientific researchers, see table below: |
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| + | rect 4 1 260 149 [[Crime|Crime]] |
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| − | {| class="wikitable" |
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| + | rect 275 4 501 146 [[Primary economic impact|Primary economic impact ]] |
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| − | |- |
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| + | rect 543 4 766 146 [[Secondary economic impact |Secondary economic impact]] |
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| − | ! Costs in anticipation of crime !! Costs as a consequence of crime !! Costs in response to crime |
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| + | rect 796 2 1038 145 [[Economic impact|Economic impact]] |
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| − | |- |
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| − | | Security expenditure || Property stolen and damaged || Police |
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| − | |- |
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| − | | Insurance resources || Lost output || Presecution |
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| − | |- |
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| − | | Precautionary behaviour || Emotional and physical impact || Legal aid |
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| − | |- |
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| − | | Fear of crime/Quality of life of potential victims || Health services || Magistrates and (Crown)courts |
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| − | |- |
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| − | | Collective/community defensive expenditure || Victim support services || Probation Service |
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| − | |- |
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| − | | Government crime prevention activity || Insurance claims || Prison Service |
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| − | |- |
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| − | | Insurance premiums || Quality of life of victims || Jury Service |
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| − | |- |
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| − | | Example || Example || Criminal Injuries Compensation resources/payouts |
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| − | |- |
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| − | | || || Witness costs |
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| − | |- |
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| − | | || || Miscarriages of justice |
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| − | |- |
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| − | | || || Offender and his/her family |
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| − | |}<br /> |
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| − | ''Table: Costs of crime by category (source: Brand and Price, 2000, edited by Decisio, 2012)'' |
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| + | desc bottom-left |
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| + | </imagemap> |
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| + | === Primary economic impact of crime === |
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| + | In general, economists use two types of methods to further categorise the [[Primary economic impact|(primary) costs]] of crime<ref name=Brand></ref>. The first way is by defining the subject who bears the effects (victims, potential victims, society etc.). From an economic point of view, criminal offences can be aimed against: |
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| + | * individuals/households |
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| + | * the commercial sector/companies<ref>Business companies have to deal with crime, ranging from shoplifting and vandalism to piracy and counterfeiting. These crimes are committed by employees (theft, fraud, money laundering) and by outsiders (shoplifting, vandalism, etc.</ref> |
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| + | * the public sector/society |
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| + | A second approach of categorising, is by breaking down the costs in relation to individual incidents (Davidson, 1999<ref>Davidson, N. (1999): Costing Burglary Reduction. In Brand, S. and R. Price (2000): The economic and social costs of crime. Home Office Research Study 217.</ref>). This way, the costs of crime are categorised as: |
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| + | # in '''anticipation of crime''': mainly costs of precaution measures to avoid crime such as locks, alarm prevention programs and surveillance. |
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| + | # as a '''consequence of crime''': for instance, loss of property, medical and health care costs, victim support etc. |
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| + | # in '''response to crime''': costs considering police, prosecution, court proceedings, sanctions etc. |
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| + | === Secondary economic impact of crime === |
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| − | |||
| + | Crime not only leads to financial or physical damage and prevention costs, but also indirectly influences the local/regional and national economy of a country (the so-called [[Secondary economic impact|secondary economic impact]]). According to Detotto and Otranto (2010)<ref>Detotto,C. and E. Otranto (2010):Does crime affect Economic growth? KYKLOS, Vol.63–August 2010-No.3, 330-345.</ref>,“crime acts like a tax on the entire economy: it discourages domestic and foreign direct investments<ref>Foreign direct investment (FDI) is a direct investment by a business or enterprise in a foreign economy. The motives of FDI are diverse, for example, to reduce export costs (less transport and export tariffs) or to take advantage of local labour forces and know-how.</ref>. On a macro-economic level crime influences: [[File:Graffiti.jpg|thumb|300px|Graffiti]] |
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| − | In general, approaches to estimate the direct impact of crime focus on three levels: |
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| − | # Costs ''in anticipation'' of crime: mainly costs of precaution measures to avoid crime such as locks, alarm prevention programs and surveillance. |
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| − | # Costs as ''a consequence'' of crime: for instance, loss of property, medical and health care costs, victim support etc. |
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| − | # Costs ''in response'' to crime: costs considering police, prosecution, court proceedings, sanctions etc.The identification and the estimation of the costs of crime is undertaken by several scientific researchers. |
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| − | |||
| − | The identification and the estimation of the costs of crime is undertaken by several scientific researchers. Moolenaar (2005)<ref>add reference</ref>, for example, estimated the total costs of crime in The Netherlands to be 20 billion euro in 2004; approximately 4.1 percent of the GDP. There is, however, a wide variation of estimations of the total direct costs of crime between countries. The table illustrates a brief, non-comprehensive, list of direct costs of crime for several countries: |
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| − | |||
| − | {| class="wikitable" |
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| − | ! Country !! Year !! Direct economic impact of crime |
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| − | | The Netherlands|| 2004|| 4.1% of the GDP |
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| − | |- |
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| − | | Wales and England|| 2000|| 6.5% of the GDP |
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| − | |- |
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| − | | United States|| 1999|| 11.9% of the GDP |
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| − | |} |
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| − | |||
| − | === Micro-economic impact === |
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| − | On a micro-economic level, crime influences three categories of economic actors Public authorities aim to prevent, detect, persecute, trial and punish criminals. Moreover, crime also influences the behaviour of individual households and private enterprises, as a (potential) victim, but also as supplier of community and civil protection services (think of security guards, neighbourhood watches and insurance companies). |
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| − | |||
| − | === How much crime is there? === |
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| − | One of the most important difficulties with mapping the economic effects of crime is the fact that only a fraction of all offenses committed are known. Especially offenses that don’t involve victims are only known if they are detected by public authorities/the police. Researchers developed several methods such as the use of assumptions, multipliers and specific statistical techniques to deal with this issue, but it remains difficult to include all effects, because one should also include effects on the change in behaviour, mental health (including production loss due to emotional damage) and the harm done to the social environment of the victim and criminal offender. |
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| − | A Dutch economic research agency<ref>SEO (2007). ''De kosten van criminaliteit''.</ref> estimated the number of criminal offences committed in the Netherlands in 2005 (see table below): |
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| − | {| class="wikitable" |
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| − | ! Category of crime !! Number of offences !! % of total |
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| − | |- |
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| − | | Murder and manslaughter|| 174|| 0.001% |
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| − | |- |
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| − | | Sexual offences|| 181,000|| 1.5% |
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| − | |- |
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| − | | Property crimes|| 6,089,000|| 52.0% |
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| − | |- |
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| − | | Assault & battery|| 254,000|| 2.2% |
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| − | |- |
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| − | | Threats|| 867,000|| 7.4% |
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| − | |- |
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| − | | Vandalism and public order|| 3,020,000|| 25.8% |
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| − | |- |
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| − | | Traffic offences|| 753,000|| 6.4% |
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| − | |- |
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| − | | Economic offences|| 81,000|| 0.7% |
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| − | |- |
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| − | | Drug offences|| 382,000|| 3.3% |
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| − | |- |
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| − | | Other offences|| 82,000|| 0.7% |
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| − | |- |
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| − | | '''Total'''|| '''11,709,174'''|| '''100%''' |
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| − | |} |
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| − | ''Table: Number of offences committed in 2005 in the Netherlands (source: SEO, 2007)'' |
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| − | Although the table above is illustrating the situation for the Netherlands, the relative ratios of the serious offences (such as manslaughter and sexual offences) versus the by far more common property crimes and vandalism are also applicable to other EU-countries. |
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| − | ==== Primary economic impact at an individual household level ==== |
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| − | Facing security threats, individual households deal with the: |
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| − | * Costs of preventive measures |
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| − | * Costs of being a victim |
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| − | * Costs due to behavioural changes due to fear of [[victimization]] |
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| − | * Production loss due to emotional damage |
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| − | * Use of mental healthcare |
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| − | * Harm to offender’s and victim’s family, friends and acquaintances. |
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| − | |||
| − | Examples of preventive measures are insurances (against property crimes), measures against breaking and entry, et cetera. The biggest cost factor by far are caused by harm to the victims. Costs as a result of loss of production due to theft or vandalism are as well substantial cost factors<ref>Ibid.</ref>. The table below illustrates an overview of the cost of criminal offences in the Netherlands. |
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| − | |||
| − | {| class="wikitable" |
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| − | |- |
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| − | ! Category of crime !! Prevention !! Consequence !! Response !! Total |
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| − | |- |
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| − | | Murder and manslaughter|| 0|| 409|| 144||554 |
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| − | |- |
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| − | | Sexual offences|| 0|| 322|| 143||466 |
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| − | |- |
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| − | | Property crimes|| 3,263|| 6,627|| 1,982||11,872 |
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| − | |- |
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| − | | Assault & battery|| 0|| 1,078|| 320||1,401 |
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| − | |- |
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| − | | Threats|| 0|| 2,128|| 171||2,299 |
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| − | |- |
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| − | | Vandalism and public order|| 178|| 1,669|| 550|| 2,397 |
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| − | |- |
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| − | | Traffic offences|| 43|| 382|| 307|| 732 |
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| − | |- |
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| − | | Economic offences|| 0|| 0|| 44|| 44 |
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| − | |- |
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| − | | Drug offences|| 0|| 0|| 253|| 253 |
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| − | |- |
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| − | | Other offences|| 0|| 0|| 153|| 153 |
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| − | |- |
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| − | | '''Total'''|| '''3,484'''|| '''12,617''' || '''4,071'''|| '''20,173''' |
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| − | |} |
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| − | ''Table: Total costs of offences committed in 2005 in the Netherlands (source: SEO, 2007, edited by Decisio)'' |
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| − | The table above illustrates furthermore that property damage results in the most damage, which is primarily due to the relatively high number of property crimes committed.The emotional consequences of crime could also lead to a loss of productivity. |
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| − | ==== Primary economic impact of crime on businesses and firms ==== |
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| − | =====Businesses===== |
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| − | Not just individual households, but also businesses have to deal with crime, ranging from shoplifting and vandalism to piracy and counterfeiting. These crimes are committed by employees (theft, fraud, money laundering) and by outsiders (shoplifting, vandalism, etc.)<ref>Bressler, M.S. (2009). The Impact of Crime on Business: A Model for Prevention, Detection & Remedy. ''Journal of Management and Marketing Research''</ref>. In the Netherlands, 60 percent of all property crimes were aimed at business companies in 2005 and in the US 35% of all retailers reported customer theft and 75% of surveyed businesses reported one of more crime incidents<ref> Burrows and Hopkins (2005). Business and Crime in Tilley, N. (2005) (Ed.) Handbook of crime prevention and community safety. Devon, Willan Publishing. In: Bressler, M.S. (2009). The Impact of Crime on Business: A Model for Prevention, Detection & Remedy. ''Journal of Management and Marketing Research''</ref>. As a result, an average Dutch company spends annually 891 EUR on preventive security measures with a total of EUR 1.3 billion in 2005<ref>SEO (2007). The costs of Crime.</ref>. In particular small businesses (retail companies) may be vulnerable to crime, just like banks, but estimates of the costs of crime are difficult to determine as many crimes against businesses go unreported out of fear of bad publicity. |
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| − | =====Security industry===== |
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| − | The global security industry consists of businesses and individuals whose aim is to sell safety from malevolent acts threatening life, property and other assets, and information. The security industry provides products and services ranging from fire and burglar alarms, locks and safes, through electronic access control, security consulting, to armoured car services, guard equipment and security fencing. The industry is also more and more providing services to public authorities. |
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| − | The security industry is an rapidly expanding industry (7 to 8% annually since 2011<ref>OECD (2004). The Security Economy</ref>). Available estimates put the private security industry's turnover at between USD 100 billion and USD 120 billion worldwide<ref>Ibid</ref>. The largest share is accounted for by the United States, but nevertheless the German security industry is estimated to be around USD 4 billion, and France's and the United Kingdom's around USD 3 billion<ref>Ibid</ref>. |
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| − | ==== Primary economic impact of crime on the public authorities ==== |
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| − | {| class="wikitable" |
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| − | |- |
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| − | ! UNDER CONSTRUCTION |
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| − | |} |
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| − | * Public authorities as victim (vandalism, and so on) |
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| − | * Public authorities as protectors of security |
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| − | The costs of policing are significant. In 2010, the Dutch government spent EUR 5 billion on policing (detection and prevention), which is ±2% of the annual public spending and 0.1% of the Dutch GDP. On top of that, the public authorities spend money on persecution and trial. The budget of the Dutch department of Justice in 2010 was almost EUR 6 billion (2.5% of the total budget<ref>The costs of one enprissoned person in the Netherlands is about EUR 208,-</ref>. |
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| − | |||
| − | == Secondary economic impact of crime == |
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| − | Crime not only leads to financial, physical damage and prevention costs, but also indirectly influences the local/regional and national economy of a country. According to Detotto and Otranto (2010)<ref>Detotto,C. and E. Otranto (2010). ''Does crime affect Economic growth?'' KYKLOS, Vol.63–August 2010-No.3, 330-345.</ref>,“crime acts like a tax on the entire economy: it discourages domestic and foreign direct investments, reduces the competitiveness of firms, and reallocates resources, creating uncertainty and inefficiency”. |
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| − | On a macro-economic level crime influences: |
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* economic growth; |
* economic growth; |
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* income; |
* income; |
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| − | * |
+ | * labour force participation; |
* income spent on security measures; and |
* income spent on security measures; and |
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| − | * |
+ | * reallocation of resources creating uncertainty and inefficiency. |
On a more local and regional level, economists define the following types of impact: |
On a more local and regional level, economists define the following types of impact: |
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* business impact (crime reduces competitiveness of companies and investments) |
* business impact (crime reduces competitiveness of companies and investments) |
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| − | * impact on property value |
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* tourism impact |
* tourism impact |
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* impact on quality of life/social capital |
* impact on quality of life/social capital |
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| + | * impact on property value |
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| − | According to Tita, Petras and Greenbaum (2006)<ref>Tita, G., T. Petras, and R. Greenbaum (2006) |
+ | According to Tita, Petras and Greenbaum (2006)<ref>Tita, G., T. Petras, and R. Greenbaum (2006): Crime and Residential Choice: A Neighborhood Level Analysis of the Impact of Crime on Housing Prices. ''Journal of Quantitative Criminology'' Vol 22, No 4, Pp 299-317.</ref> “crime serves as an important catalyst for change in the socio-economic composition of communities. The effect crime has on the local property value is one of those catalyst effects. The question whether crime rates affect housing prices has been a popular subject of research over the last decades. However, although most empirical studies confirm that there is a negative impact of crime on housing prices<ref>See, e.g.: Pope & Pope (2012): Crime and property values: Evidence from the 1990s crime drop; Ihlanfeldt, K & T. Mayock (2009) "Crime and Housing Prices"; Gibbons, S. (2004): The Costs of urban property crime; or Linden, L and J. Rockoff (2008) "Estimates of the Impact of Crime Risk on Property Values from Megan’s Laws".</ref>, there is still no real consensus on the extent of this impact. The availability and quality of crime statistics (e.g, how should one incorporate non-recorded crime?), dealing with changes over time, the [[Crime displacement|displacement effect]], and the fact that the housing prices are determined by a complex set of factors and not just crime, are the most important reasons of this lack of consensus. |
| − | Another effect of crime is that residents become |
+ | Another effect of crime is that residents become less committed to their communities, causing the ‘social fibre’ of the community to be weakened. An example of the loss of social capital is that residents of neighbourhoods with a criminal reputation are judged to be associated with criminal activities, leading (amongst others) to stigmas that, for example, prevent those people from finding jobs<ref>UNODC and World Bank (2007): Crime, Violence, and Development: Trends, Costs, and Policy Options in the Caribbean. Report No. 37820.</ref>. |
| + | Further examples of secondary economic effects of crime: |
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| − | == Related subjects == |
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| + | * The carbon cost of crime<ref> Criminologist Ken Pease, has revealed the significance of crime on English and Welsh CO² output; an estimated total of 11.6 million tonnes - that's 2% of the UKs' total CO² emissions. See: Ken Pease (2009). The Carbon Cost of Crime and Its Implications. http://www.securedbydesign.com/professionals/pdfs/The-Carbon-Cost-of-Crime.pdf</ref>. |
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| − | Economic impact of crime is a type of [[Economic impact|economic impact]]. Furthermore, this subject is closely related to: |
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| + | * The opportunity costs of police, rescue, and fire departments. |
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| − | * the [[Economic effects of terrorism|economic effects of terrorism]], |
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| + | * Moving costs of residents who want to escape from crime levels in "bad" neighbourhoods.<ref>http://www.aboutproperty.co.uk/uk-property/2007/3/5/crime-and-bad-neighbours-top-reasons-for-movi in Pease, K & M. Gill (2011) Home security and place design: some evidence and its policy implications, p.27)</ref> |
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| − | * the [[The economics of criminal and terrorist behaviour|economics of criminal and terrorist behaviour]], and |
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| − | * [[economic tools]] to measure the economic impact of crime. |
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| + | ==Methodological issues of economic research== |
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| − | == References == |
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| + | As mentioned earlier above, most crime and economic research studies have to deal with several "information gaps" and some methodological issues and [[Limits of economic analysis|limitations]]. First of all, there are issues with crime statistics since not all crime is recorded or is differently categorised across different police regions. In addition, not only actual crime, but also the fear of crime (the perceived risk of crime) should be included in analysis. Many studies report incomplete or unreliable data concerning the cost of mental health issues after crime, the exact reimbursement of victims by insurance agencies, costs of "white collar" crime, costs of "victimless" crimes such as illegal gambling, illicit drug crimes, prostitution, etc.<ref>Shapiro, E. (1999): Cost of Crime, A Review of the Research Studies.</ref> On top of that, it is very difficult to quantify subjective costs like pain and suffering or to determine the "willingness to pay" (WTP)<ref>The willingness to pay "is the maximum amount a person would be willing to pay, sacrifice or exchange in order to receive a good or to avoid something undesired, such as pollution" or crime (Source Wikipedia,Online: http://en.wikipedia.org/wiki/Willingness_to_pay)</ref>. |
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| − | <references/> |
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| + | == Related subjects == |
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| − | = MAP = |
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| + | *[[Economic]] |
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| − | <websiteFrame> |
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| + | * [[Economic impact]] |
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| − | website=http://securipedia.eu/cool/index.php?wiki=securipedia.eu&concept=Economic_effects_of_crime |
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| + | **[[Economic impact of urban planning |
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| − | height=1023 |
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| + | **[[Economic impact of security threats|The economic impact of security threats]] |
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| − | width=100% |
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| + | ***[[Economic effects of terrorism|Economic impact of terrorism]] |
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| − | border=0 |
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| + | **[[Economic impact of security measures]] |
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| − | scroll=auto |
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| + | **[[The economics of criminal and terrorist behaviour|Economics of criminal and terrorist behaviour]] |
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| − | align=middle |
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| + | *[[Economic output]] |
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| − | </websiteFrame> |
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| + | *[[Economic tools]] |
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| + | {{references}} |
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| − | <headertabs/> |
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Latest revision as of 19:43, 10 January 2018
Crime imposes huge economic effects on European societies. These economic effects of crime are, in essence, a category of economic impact.
Contents
Description
Crime not only leads to material and immaterial costs for those who have become victimised, but crime also forces local and national authorities to spend billions on the prevention of crime and the detection, prosecution and punishment of criminals. For the Netherlands, for example, the costs of crime are estimated to be 20.2 billion euro in 2005[1], approximately 4.1 percent of the GDP. The British Home office researchers Brand and Price (2000)[2] estimate the costs of crime to be between £35 and £60 billion per year for England and Wales.
The identification and the estimation of the costs of crime have received broad attention in economic literature and research, but the economic effect(s) and impact of crime on society is still an underexposed field of interest. One important reason of this lack of studies is that it is very difficult to quantify the costs of crime with the help of economic tools, and especially the benefits since they are in most of the cases non-economic, e.g. health benefits, the benefits of living in a safe area, etc. Moreover, while economic analysis (such as social cost-benefit analysis) is common in many contexts, the results depend largely on the used methodologies, including the underlying assumptions and measured effects.[3]. Nevertheless, the fact remains that there is an economic impact related to crime (in both a direct and indirect way).
Crime is a major part of every urban society, but it is not always as relevant for urban planners (e.g. cyber crime). In order to help the urban planner decide when the costs of crime should be considered, the Securipedia pages on urban objects do not just address the economic function of urban objects, but also the economic dimension of the more specific security threats.
Types of costs and economic effects of crime
Economists use various definitions and terminology for categorising the economic impact of crime. The two main categories (used in Securipedia) are the primary and secondary economic impact of crime, also referred to as direct and indirect economic effects[4].
This relationship is illustrated below in the clickable map:
Primary economic impact of crime
In general, economists use two types of methods to further categorise the (primary) costs of crime[2]. The first way is by defining the subject who bears the effects (victims, potential victims, society etc.). From an economic point of view, criminal offences can be aimed against:
- individuals/households
- the commercial sector/companies[5]
- the public sector/society
A second approach of categorising, is by breaking down the costs in relation to individual incidents (Davidson, 1999[6]). This way, the costs of crime are categorised as:
- in anticipation of crime: mainly costs of precaution measures to avoid crime such as locks, alarm prevention programs and surveillance.
- as a consequence of crime: for instance, loss of property, medical and health care costs, victim support etc.
- in response to crime: costs considering police, prosecution, court proceedings, sanctions etc.
Secondary economic impact of crime
Crime not only leads to financial or physical damage and prevention costs, but also indirectly influences the local/regional and national economy of a country (the so-called secondary economic impact). According to Detotto and Otranto (2010)[7],“crime acts like a tax on the entire economy: it discourages domestic and foreign direct investments[8]. On a macro-economic level crime influences:
- economic growth;
- income;
- labour force participation;
- income spent on security measures; and
- reallocation of resources creating uncertainty and inefficiency.
On a more local and regional level, economists define the following types of impact:
- business impact (crime reduces competitiveness of companies and investments)
- tourism impact
- impact on quality of life/social capital
- impact on property value
According to Tita, Petras and Greenbaum (2006)[9] “crime serves as an important catalyst for change in the socio-economic composition of communities. The effect crime has on the local property value is one of those catalyst effects. The question whether crime rates affect housing prices has been a popular subject of research over the last decades. However, although most empirical studies confirm that there is a negative impact of crime on housing prices[10], there is still no real consensus on the extent of this impact. The availability and quality of crime statistics (e.g, how should one incorporate non-recorded crime?), dealing with changes over time, the displacement effect, and the fact that the housing prices are determined by a complex set of factors and not just crime, are the most important reasons of this lack of consensus.
Another effect of crime is that residents become less committed to their communities, causing the ‘social fibre’ of the community to be weakened. An example of the loss of social capital is that residents of neighbourhoods with a criminal reputation are judged to be associated with criminal activities, leading (amongst others) to stigmas that, for example, prevent those people from finding jobs[11].
Further examples of secondary economic effects of crime:
- The carbon cost of crime[12].
- The opportunity costs of police, rescue, and fire departments.
- Moving costs of residents who want to escape from crime levels in "bad" neighbourhoods.[13]
Methodological issues of economic research
As mentioned earlier above, most crime and economic research studies have to deal with several "information gaps" and some methodological issues and limitations. First of all, there are issues with crime statistics since not all crime is recorded or is differently categorised across different police regions. In addition, not only actual crime, but also the fear of crime (the perceived risk of crime) should be included in analysis. Many studies report incomplete or unreliable data concerning the cost of mental health issues after crime, the exact reimbursement of victims by insurance agencies, costs of "white collar" crime, costs of "victimless" crimes such as illegal gambling, illicit drug crimes, prostitution, etc.[14] On top of that, it is very difficult to quantify subjective costs like pain and suffering or to determine the "willingness to pay" (WTP)[15].
Related subjects
- Economic
- Economic impact
- [[Economic impact of urban planning
- The economic impact of security threats
- Economic impact of security measures
- Economics of criminal and terrorist behaviour
- Economic output
- Economic tools
Footnotes and references
- ↑ SEO (2007): De kosten van criminaliteit [The cost of crime]. Publication Number: 971.
- ↑ 2.0 2.1 Brand, S. and R. Price (2000): The economic and social costs of crime. Home Office Research Study 217.
- ↑ For example: How does one economically quantify the reputation of local police with regards to enforcing safety?
- ↑ Primary economic impact (or direct effects) are generally defined as the initial, immediate economic output generated by a specific cause (in this case a criminal offence). Secondary economic impact (or indirect effects) are generated each time a subsequent transaction is made, for example, the impact of crime on the real estate value in the neighbourhood.
- ↑ Business companies have to deal with crime, ranging from shoplifting and vandalism to piracy and counterfeiting. These crimes are committed by employees (theft, fraud, money laundering) and by outsiders (shoplifting, vandalism, etc.
- ↑ Davidson, N. (1999): Costing Burglary Reduction. In Brand, S. and R. Price (2000): The economic and social costs of crime. Home Office Research Study 217.
- ↑ Detotto,C. and E. Otranto (2010):Does crime affect Economic growth? KYKLOS, Vol.63–August 2010-No.3, 330-345.
- ↑ Foreign direct investment (FDI) is a direct investment by a business or enterprise in a foreign economy. The motives of FDI are diverse, for example, to reduce export costs (less transport and export tariffs) or to take advantage of local labour forces and know-how.
- ↑ Tita, G., T. Petras, and R. Greenbaum (2006): Crime and Residential Choice: A Neighborhood Level Analysis of the Impact of Crime on Housing Prices. Journal of Quantitative Criminology Vol 22, No 4, Pp 299-317.
- ↑ See, e.g.: Pope & Pope (2012): Crime and property values: Evidence from the 1990s crime drop; Ihlanfeldt, K & T. Mayock (2009) "Crime and Housing Prices"; Gibbons, S. (2004): The Costs of urban property crime; or Linden, L and J. Rockoff (2008) "Estimates of the Impact of Crime Risk on Property Values from Megan’s Laws".
- ↑ UNODC and World Bank (2007): Crime, Violence, and Development: Trends, Costs, and Policy Options in the Caribbean. Report No. 37820.
- ↑ Criminologist Ken Pease, has revealed the significance of crime on English and Welsh CO² output; an estimated total of 11.6 million tonnes - that's 2% of the UKs' total CO² emissions. See: Ken Pease (2009). The Carbon Cost of Crime and Its Implications. http://www.securedbydesign.com/professionals/pdfs/The-Carbon-Cost-of-Crime.pdf
- ↑ http://www.aboutproperty.co.uk/uk-property/2007/3/5/crime-and-bad-neighbours-top-reasons-for-movi in Pease, K & M. Gill (2011) Home security and place design: some evidence and its policy implications, p.27)
- ↑ Shapiro, E. (1999): Cost of Crime, A Review of the Research Studies.
- ↑ The willingness to pay "is the maximum amount a person would be willing to pay, sacrifice or exchange in order to receive a good or to avoid something undesired, such as pollution" or crime (Source Wikipedia,Online: http://en.wikipedia.org/wiki/Willingness_to_pay)
