Objective:

To assess the economic losses for households and firms produced by crime to business in Mexico.

Methodology:

A general equilibrium model of Mexico is built. The costs of business insecurity are introduced as a combination of sales and capital taxes. The rates were calibrated with the Enterprise Survey of the World Bank.

Results:

The loss for insecurity on business in Mexico is in the order of 4 to 5 percent of the GDP.

Limitations:

The modeling does not consider the dynamics of the process nor the cost of insecurity in the primary sector.

Originality:

It is found that if firms can shift the crime tax forward, the household losses become equivalent to a proportional tax. To the extent that firms shift the tax backwards, especially to capital, crime functions as a progressive tax.

Conclusions:

Business insecurity has significant consequences on the Mexican economy.

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