The effects of extortion and security device adoption on entrepreneurial entry and exit: Evidence from Guatemala

Alejandro Estefan and Romina Ordoñez

Journal of Public Economics, 2025, vol. 249, issue C

Abstract: Using survey data and administrative records from franchise stores of a multinational company operating in Guatemala’s food retail sector, we document stylized empirical facts about extortion of low-income microentrepreneurs and the protective impact of security cameras. Extortion curtails market entry, increases exit, and lowers economic competition. Security cameras reduce exit and improve competition. To rationalize these findings, we propose a standard model of industry dynamics in which we incorporate extortion as a sales tax and security devices as a costly investment that lowers the probability of victimization. We structurally estimate the model to conduct counterfactual policy simulations and compare the effectiveness of security cameras with that of alternative security devices.

Keywords: Microentrepreneurship; Extortion; Latin America; Crime (search for similar items in EconPapers)
JEL-codes: D22 F63 K14 L26 O54 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:249:y:2025:i:c:s0047272725001628

DOI: 10.1016/j.jpubeco.2025.105464

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