Crime as a Social Cost of Poverty and Inequality: A Review Focusing on Developing Countries

Crime as a Social Cost of Poverty
and Inequality: A Review Focusing
on Developing Countries

E Bourguignon

resulting monetary costs of property crime are rather moderate. They
amount to only 0.2 per cent of GDP in the US and 0.6 in Latin America.

Tb these monetary costs, we now add πon-monetary costs corresponding
to the cost of the pain and suffering in ease of property crime, and to the
disappearance of human capital in case of homicides. The first figure is
based on jury estimates of the cost of pain in the case of property crime in
the US It is approximately equal to the material cost of crime appearing in
the first two rows of Table 2, that is 0.7 per cent of GDP. The same
proportionality factor with respect to the total amount of property crime
is applied for Latin America leading to a cost of 2.1 per cent of GDP⁴⁰. The
human capital loss is computed by LG in the case of Latin America on the
basis of the average life expectancy of homicide victims and unskilled
wage rates. The resulting cost is substantial since it amounts to 1.7 per
cent of GDP. The figure for the US is obtained by proportionality with the
homicide rate, that is approximately a ratio 1:4 with respect to Latin
America.

Table 2 Estimates of the Cost of Crime in the US and in Latin
America around 1995

(Per cent of giip)

	US	Iaitin America
“Transfers" = monetary amount of property crime	(0.5)	(!■5)
Monetarycost (medical expenses, opportunity cost of time...)	0.2	0.6
Non monetary exist (cost of pain)	0.7	2.1
Human capital loss (homicides)	0.3	1.7
Opportunity cost of incarceration	0.6	0.1
Criminaljustiec	1.3	1.6
Private crime prevention	0.6	1.4
Tbtal	3.7	7.5

Source: Based on estimates by Freeman (1996). Londonti and Gucrrero (1998) and own calculations.

⁴⁰ Aetualh- U: give a much larger estimate tor that component -5.3 per cent of GDI’- baaed On
reported willingness to pay for safety. However, the figure they derived from the surveys at their
disposal seems artificially high in CompariMin to the us figure.

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