Juan Carlos Echeverry

Comments onCrime and Finance: Evidence from

ColombiaPshisva and Suarez

• 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

• 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

• 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

• 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

• 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