Echoes of insecurity: The detrimental effect of crime on corporate employment

Abstract

This study investigates the influence of local crime on corporate employment in China. Leveraging a comprehensive data set of 85 million court judicial documents, we construct city‐level crime measures. We find that local crime is negatively associated with corporate employment. Using China's Gang Crime Crackdown program as a quasi‐natural experiment and the difference‐in‐differences approach, we further identify the causal relationship. Violent crimes and those with longer sentences drive the negative correlation between local crime and corporate employment. This relation is particularly pronounced among low‐skilled employees, in cities with inadequate commuter security, and in financially constrained firms. Our findings emphasize the role of a secure social environment in the local labor market and firms' employment decisions.