Question

Describe how crime impacts the economy on a national and international scale. Discuss both the challenges and advantages of measuring the impacts of crime.

Answer 1

In economics, criminal activities are those commercial activities which operate outside of regulations, laws, and taxes. GDP does not include output from the crime thus underestimates GDP. The criminal activities such as a underground economy impacts the entire economy: it discourages the direct investments on national and international level, reduces firms' competitiveness, and reallocates resources creating inefficiency and uncertainty on a national and international scale.

The main challenges of measuring the crime impact is that it cannot be counted in government statistics; and deliberately create shortages in legal products thus forcing people to purchase from them. The workers also don't receive any legal protection. Moreover there are losses to legitimate industries at national and international scale who finds difficult to compete with the lower expenditure of illegal operations.

The advantage of these criminal activities is that it provide employment and income to people. It helps people to afford health services, medicine, and other essential goods they could never obtain otherwise. For instance, in a country when doctor provides services illegally it results to low-cost health care on a cash basis as he is not paying the taxes