Does crime impede economic growth? An evidence from India

Abstract

Crime imposes significant direct and indirect costs on society. While a great wealth of literature focuses on crime as a result of prevailing economic conditions, one cannot exclude the possibility that the relationship between crime and economic growth may go the other way around. This study employs an Autoregressive Distributed Lag (ARDL) approach to empirically examine the extent to which homicides affect economic growth. The case study was conducted in India, and longitudinal annual data from 1990 to 2019 were employed. The bounds cointegration test reveals that crime rate, proxied by homicide rate, along with investment, FDI, exports, and enrolment Granger cause real per capita GDP in the long run. The homicide rate will have a significantly negative impact on economic growth in the short run. A one percentage increase in homicide rates leads to 0.25% decrease in economic growth. The findings point to urgent attention to the reduction of crime rates by increasing the opportunity cost of criminal activities and reducing the damaging effects of homicides on economic growth.