Abstract
There are a number of mechanisms through which illegal activity can affect economic activity. Until now, most empirical research that has attempted to quantify the negative effects of illegal activity on economic performance has used international cross-section comparisons. The present study is apparently the first attempt in the literature to examine directly the effects of crime and corruption (and one of few to examine the effects of terror) on private investment by examining the behavior of investors over time in a specific country within a structured model of investment. Israel was chosen as the subject of the study. According to international indexes, Israel’s status as a civil society has degraded over the past decade and according to the corruption index of Transparency International, it is now ranked 33rd in the world. The results of the research can serve as the basis for comparison in similar studies of other Western countries. The study’s conclusions support the hypothesis that crime and major (but not sporadic), significant or ongoing, terror events play an important part in determining the investment behavior of firms in Israel, both in the short and the intermediate/long run.
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Zelekha, Y., Bar-Efrat, O. Crime, Terror and Corruption and Their Effect on Private Investment in Israel. Open Econ Rev 22, 635–648 (2011). https://doi.org/10.1007/s11079-009-9129-5
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DOI: https://doi.org/10.1007/s11079-009-9129-5