Friends of the Forensic Science Club, this week we present the paper “How bad is crime for business? Evidence from consumer behavior”, by Fe, H. and Sanfelice, V. (2022), in which authors carry out a study with data from Chicago city to understand the behavior of consumers when it comes about choosing what business to frequent, considering criminality rates of the place in which they are.
Numerous studies suggest that fear of victimization causes consumers, workers and entrepreneurs to alter their activities. Crime, and the behavioral changes it brings, increases the cost of doing business in a place and thus, affects the economic development of the entire area.
The economic literature has dedicated little attention to studying whether crime impacts business activities, and if so, how, specifically exploring consumer behavior.
This is the authors’ goal with this article: to fill the gap in the literature on this point by measuring consumer behavior as a result of criminal activities in an area. Understanding this is critical for businesses, urban planners, urban criminology and policy makers.
In recent times, the presence of small local businesses such as coffee shops, supermarkets and pubs has become a symbol of neighborhood development. Measuring consumer response to local crime, therefore, helps policymakers understand how crime can affect efforts to boost economic development.
A 2019 study reported that a higher prevalence of violent and private property crime would be significantly associated with both business failure and business relocation. Another 2016 study found that neighborhood crime reduces commercial property values. However, there is no clear consensus on the effect of crime, as most empirical results do not yet have causal interpretations.
To understand the relationship between crime and consumer choice, three roles must be examined: the consumer, the offender, and the business.
Criminological theory recognizes that a motivated offender, the presence of a suitable target and the absence of effective protection are essential elements that lead to crime. Aware of these elements, citizens assimilate the risk of becoming victims and modify their actions accordingly.
The level of crime associated with the location of a place can affect the consumers of a business in several ways. For example, individuals may consider the risk of becoming a victim of crime while physically visiting an establishment and may choose to avoid certain areas.
The perception of violence has also affected residential decision making, reshaping cities as families flee to the suburbs in search of a safer environment.
Consumers can also be affected through the emotional experiences associated with using a service: positive experiences in an environment have a positive influence on emotions, and vice versa.
On the other hand, people can also assess their risk of being victimized through observation, as already pointed out by the famous broken window theory, or, for example, by being aware of police presence in a place.
On the other hand, there are several ways in which consumer flow affects individuals’ decision to commit crimes. For example, places with more people offer more opportunities for offenders to strike. A greater flow of people in urban areas can also disrupt social order and facilitate the discreteness of illicit activities by decreasing the likelihood of criminal apprehension. Even consumers can become criminals when gatherings generate social conflict.
As for businesses, they may suffer from crimes such as theft or robbery, and spend a lot of economic resources on prevention and protection measures to increase private security. On the other hand, crime can lead to a decrease in economic benefits if it scares away consumers.
Authors analyzed data from the police authorities of the city of Chicago, one of the largest cities in the United States.
The main results suggest that the effect of crime on consumer visits to businesses is important and significant when incidents occur in public spaces, while crimes occurring in private residences do not have a statistically relevant effect.
On the other hand, crime appears to have a negative effect on the number of visits and the number of customers an establishment receives, but no significant effects were found on the length of time these customers stayed in the stores or business.
And, not surprisingly, nighttime visits are more sensitive to changes in crime than daytime visits.
The article’s findings are consistent with the argument that the perception of violence and the risk of victimization drives consumers away, making businesses potentially less profitable.
Understanding this is useful in helping policymakers and local agencies plan for the revival and economic development of communities, hand-in-hand with effective crime prevention policies.
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