The Long-term Effects of Crime: From Individual Concerns to Macroeconomic Consequences

Crime shocks are frequent and disruptive, often heightening public concerns about violence and personal safety. Yet little is known about their potential long-term economic implications. This paper studies how historical exposure to crime shapes current perceptions of crime, and how these individual perceptions in turn affect the macroeconomic impacts of new crime shocks. Using cross-country survey data matched with historical crime records, we find that individuals historically exposed to high-crime years are more likely to prioritize fighting crime over other societal goals, such as maintaining a stable economy. This historical link is particularly strong among older and richer individuals, and among parents. A stronger fiscal position, which presumably enhances a country's ability to devote resources to fight crime, helps mitigate the persistence of crime exposure. At the aggregate level, countries where crime concerns are more entrenched experience larger GDP declines in the aftermath of high-crime years, driven mainly by lower consumption, capital accumulation, and productivity, rather than changes in employment.