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Homicide, at 13 per

Homicide, at 13 per cent, is the third largest category. The economic impact of homicide in 2015 was approximately $1.79 trillion PPP. Direct costs of homicide and violent crime include medical costs, lost earnings and damages to the victim and the perpetrator. Indirect costs include lost productivity of the victim, family and friends due to psychological trauma. Economic costs arising from intentional homicides are greater than the costs of any other category of crime or conflict. The model accounts for the costs related to the victim and perpetrators of crime. The indirect costs of homicide are extremely high, as victims of homicide can have no positive influence on productivity, unlike other crimes where the victim may be able to contribute to the economy after recovery; therefore their lifetime earnings are a loss to the economy. Reflecting this, the economic impact of violent and sexual assault is three times less than the impact of homicide. In 2015 violent and sexual crimes accounted for $545 billion PPP or four per cent of the global economic impact of violence. Figure 3 highlights the composition of the total economic impact of violence for 2015, broken out by indicator across four categories: military, internal security, interpersonal violence, and conflict. Government expenditure on both the military and domestic security account for over 70 per cent of the total economic impact of violence. As would be expected, more peaceful countries have a lower economic impact of violence as a percentage of GDP. However, this relationship is not linear. As the level of peacefulness decreases, costs associated with violence increase exponentially, particularly in situations of protracted conflict, which both increase the cost of violence and shrink the total amount of economic activity. This relationship is shown in figure 4. The non-linear nature of correlation between the economic impact of violence and peacefulness also shows the economic resilience of developed economies. While the unit cost of most types of violence is higher in developed economies, they do not suffer as many long term consequences of violence as developing countries. Developed and diversified economies can more efficiently reallocate labour and capital from sectors affected by violence to other sectors. By contrast, smaller developing economies lack such diversification and violence cause more economic disruptions. One study on the impact of terrorism on growth in Asian economies showed that economic growth fell by 1.4 per cent for each incident of transnational terrorism per million people in smaller developing economies, with no such growth implication of terrorism in developed economies. 10 FIGURE 3: DETAILED COMPOSITION OF GLOBAL VIOLENCE CONTAINMENT, 2015 The majority of expenditure for violence containment is for the military and internal security. Military Internal Security Interpersonal Violence Conflict GDP losses Military (excluding US) Homicide Domestic security Refugees and IDPs US military related Private security Violent and sexual assault Fear Terrorism Internal conflict UN Peacekeeping Peacebuilding Small arms External conflict Source: IEP THE ECONOMIC VALUE OF PEACE 2016 | Results & Trends 10

FIGURE 4 ECONOMIC IMPACT OF VIOLENCE AS A PERCENTAGE OF GDP VS 2015 GLOBAL PEACE INDEX OVERALL SCORE As the level of peace decreases, the costs associated with violence increase exponentially. 60% r=0.70 Iraq Syria ECONOMIC IMPACT OF VIOLENCE, % OF GDP 50% 40% 30% 20% 10% Botswana Afghanistan Venezuela South Sudan Honduras Colombia Central African Republic Lesotho North Korea Libya Somalia El Salvador Jamaica Mauritania SudanYemen Oman Saudi Arabia Guatemala South Africa Ukraine Russia Namibia Democratic Republic of the Congo United States Nigeria Lebanon 0% 1.00 1.50 2.00 2.50 3.00 3.50 4.00 More peaceful GPI Less peaceful Source: IEP METHODOLOGY AT A GLANCE IEP’s methodology for accounting for the economic impact of violence and conflict is based on 16 variables grouped into three domains; (1) security services and prevention oriented costs, (2) conflict-related costs and (3) interpersonal violence. The Global Peace Index is used as the initial point of reference for developing the costing model. The definition underpinning the selection of these categories is all expenditure related to “containing, preventing and dealing with the consequences of violence”. IEP’s model includes both direct and indirect costs of the violence, as well as a multiplier. Examples of direct costs include medical costs for victims of violent crime, capital destruction from violent conflict and costs associated with the security and judicial systems. Indirect costs include lost wages or productivity from crime due to physical and emotional trauma. There is also a measure of the impact of fear on the economy, as people who fear that they may become a victim of violent crime alter their behaviour. 11 The multiplier effect calculates the additional economic activity that would have been accrued if the direct costs of violence had been avoided. An important aspect of the model is the ability to compare the economic impact of violence across countries. Therefore, the methodology uses 2014 constant purchasing power parity (PPP) international dollars, which makes the cost comparable between countries and over time. TABLE 2 VARIABLES INCLUDED IN THE ECONOMIC IMPACT OF VIOLENCE MODEL, 2015 The cost of violence containment model includes both costs aimed at preventing violence and the consequential costs of violence. SECURITY SERVICES AND PREVENTION ORIENTED COSTS ARMED CONFLICT-RELATED COSTS Military expenditure Direct costs of deaths from internal violent conflict Homicide Internal security expenditure Direct costs of deaths from external violent conflict Violent assault Private security Indirect costs of violent conflict (GDP losses due to conflict) Sexual assault UN peacekeeping Losses from status as refugees and IDPs Fear of crime INTERPERSONAL VIOLENCE ODA peacebuilding expenditure Small arms imports Indirect costs of incarceration Terrorism THE ECONOMIC VALUE OF PEACE 2016 | Results & Trends 11

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