Economic Liberalization and Violent Crime

I study the effect of economic liberalization on violent crime. The particular emphasis is on the case of India, where, in the years following 1991, there was a virtual dismantling of controls on entry and production in registered manufacturing. This was accompanied by a significant reduction in impediments to foreign trade and access to foreign exchange. Economic controls create an incentive for illegal trade, and a frequent by-product of illegal trade is violent crime. Consequently, violent crimes such as murders would be expected to decline following market-based reforms. Analysis of aggregate all-India data, as well as data at the state level, suggests that economic reforms did indeed lead to a reduction in violent crime. I extend the analysis to a panel of countries and find strong evidence that greater trade openness is negatively related to violent crime.