Influence of crime on business opening in Brazilian states: An analysis from 2000 to 2021

Abstract

This study investigates the influence of crime on firm creation across Brazilian states between 2000 and 2021. Using panel data and a dynamic model estimated through the System GMM approach, we examine the effects of homicide rates, as well as fiscal and demographic variables, on entrepreneurial dynamics. The results indicate that crime exerts a negative and statistically significant impact on the creation of new businesses, while public security expenditures and fiscal capacity display heterogeneous effects depending on their allocative efficiency. The lagged dependent variables reveal strong temporal persistence in entrepreneurial activity. Moreover, substantial regional disparities in firm creation are observed, associated with persistent structural heterogeneities. The findings suggest that reducing violence, combined with effective public policies and enhanced investment capacity, is essential to strengthening the business environment across Brazilian states.