Assessing the Problem:
- Puerto Rico, the Caribbean – Jamaica in particular – and other developing countries, since the 1980’s, have placed great emphasis on a ‘FDI’ lead development strategy. This strategy is expected to increase capital formation and bolster production efficiencies through the transfer of new technologies and investment capital.
- The prevalence of Violent Crimes has been shown to have a negative impact on the productive capacity of many countries, exerting high levels of uncertainties, low expected returns and increased production costs among many other disincentives. Being cognizant of the implications of Violent Crimes on a country’s productive capacity, it can be deduced that incidents of Violent Crime can deter and dissuade investors from selecting Jamaica as an investment hub.
Purpose of this Study:
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- To examine the effect of Violent Crime on Foreign Direct Investment (FDI) in Jamaica through the use of a Violent Crime Index and Individual Crime Variables.
Analyzing the Data:
- The Violent Crime Index is an average of the following crime variables: Murder, Rape and Carnal Abuse, Shooting with Intent and Robbery.
- Data was retrieved from the Ministry of National Security 1970-2001.
Main findings of this study:
- Violent Crime and FDI are not significantly correlated
- Murder Rate is significantly and positively correlated with FDI, however, more investigation is needed to ascertain the direction of the relationship that exists.
- Rape, Carnal Abuse and Shooting with Intent did not affect the flow of FDI in Jamaica for the period 1970-2001
- Robbery and FDI are shown to be significantly and negatively correlated at the 5% level
Policy Implication:
The relationship between Robbery and FDI pose a major benefit for policy makers due to the fact that Robbery and FDI are negatively related. This means that there will be no problem employing a trade-off strategy among both variables. This strategy would see more efforts being placed on the reduction of Robberies throughout the country which would then trigger an increase in FDI flows and by extension enhance the country’s attractiveness as an investment hub to foreign investors.
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About the author: Carnel Campbell has an Msc. in Economics from UWI. He is currently a Risk Analyst at Jamaica Deposit Insurance Corporation and can be contacted via email: carnelcampbell@yahoo.com
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