Does Violence Deter Investment and Hinder Economic Growth?*

Using a panel of developed and developing countries, we investigate whether a country’s investment and economic growth rate are negatively related to its violence level. Using GMM and Arelano-Bond procedures we found that violence is a strong deterrent to investment and thus hinders economic growth. Furthermore, we use a broader measure of violence that is able to account for civil war and violent deaths not reported as homicides. This broader measure of violence outperforms intentional homicides in explaining the effect of violence on both investment and economic growth.