GEP Seminar: Erik Hornung (University of Cologne)

NAFTA and drug-related violence in Mexico (with Eduardo Hidalgo and Pablo Selaya)

Abstract:  We investigate how the introduction of NAFTA in 1994 affected drug-related violence in Mexico. NAFTA's open border policy increased profits for drug-tracking organizations leading to increased competition over smuggling routes. Using a generalized DiD approach, we inspect changes in drug-related homicides after the agreement across municipalities with and without optimal drug-trafficking routes, predicted using least cost paths algorithms. Homicides increase by 2.6 deaths per 100.000 inhabitants in municipalities with a drug-trafficking route, equivalent to an increase of 30% relative to the pre-NAFTA mean. The resulting persistent shift in violence is driven by a relocation effect concentrating on the routes.