This paper studies the consequences of predation for labor misallocation when
Örms can deploy guard labor as a means of protecting themselves. We build a
simple theory and combine it with data for the 142 countries covered by the World
Bank enterprise surveys which ask about Örm-level experiences with predation and
spending on protection. Our analysis suggests that about two thirds of the output
losses are due to protection e§ort. The paper explores how distortions vary with Örm
size across countries and how this a§ects the aggregate output loss. The fact that we
have a direct measure of Örm-level distortions allows us to provide a direct assessment
of their impact. We also study how much investment decisions and sectoral labor
allocation are a§ected by predation.