Juan Carlos Echeverry

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Comments on Crime and Finance Evidence from
Colombia Pshisva and Suarez

• Juan Carlos Echeverry

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• The title Crime and finance or Kidnappings and
  investment
• Crucial question for the impact of conflict on
  Colombian Economic activity the key channel
• Estimations of internal armed conflicts show that
  there was not important impact before mid-nineties

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• The period 1996 - 2002
• There are several stories affecting the second
  half of the nineties external shocks, internal
  politics, shift in the conflict, etc.
• The relationship how to tackle it
• What does the kidnapper know and do
• What does the person likely to be kidnapped know
  and do
• What does the firm know and do

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• Is kidnapping targeted to personal and family
  wealth or firms
• These actors react to this possibility by hedging
• Hence, the emphasis of the paper on firm-related
  kidnappings is not entirely clear
• What kidnappers know? Only in some cases they
  actually target the person for his/her link with
  a specific firm
• In this period firms should have already
  internalized this phenomenon and developed
  strategies to tackle it the risk of kidnappings
  can be calculated
• Hence, the equilibrium level of investment should
  already have taken that into consideration

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• The dependent variables are subject to
  measurement errors
• kidnappers not identified as owners
• kidnappings actually underreported
• sons of owners - authors recognize this
• Kidnappings and regions the regions that could
  be driving the results are not really meaningful
  economically
• Kidnappings might be endogenous to investment
• Worrisome Table 6 separates firms directly
  affected by kidnappings and nothing comes out

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• The authors compute the industry effects which
  are difficult to understand
• There is previous evidence that is not mentioned
• Parra (1999) I/Y declines in 0.66 facing and
  increase of 1 in homicide rate
• Echeverry et al. (2000) decline of 0.54
• Characteristics and length of the conflict matter
  

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