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  • Author: Juan Camilo Castillo, Daniel Mejia, Pascual Restrepo
  • Publication Date: 02-2014
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: Using the case of the cocaine trade in Mexico as a relevant and salient example, this paper shows that scarcity leads to violence in markets without third party enforcement. We construct a model in which supply shortages increase total revenue when demand is inelastic. If property rights over revenues are not well defined because of the lack of reliable third party enforcement, the incentives to prey on others and avoid predation by exercising violence increase with scarcity, thus increasing violence. We test our model and the proposed channel using data for the cocaine trade in Mexico. We found that exogenous supply shocks originated in changes in the amount of cocaine seized in Colombia (Mexico's main cocaine supplier) create scarcity and increase drug-related violence in Mexico.
  • Topic: Crime, Economics, War on Drugs, Narcotics Trafficking, Law Enforcement
  • Political Geography: Colombia, Latin America, Mexico
  • Author: Oeindrila Dube, Omar Garcia-Ponce, Kevin Thom
  • Publication Date: 02-2014
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: We examine how commodity price shocks experienced by rural producers affect the drug trade in Mexico. Our analysis exploits exogenous movements in the Mexican maize price stemming from weather conditions in U.S. maize-growing regions, as well as export flows of other major maize producers. Using data on over 2,200 municipios spanning 1990-2010, we show that lower prices differentially increased the cultivation of both marijuana and opium poppies in municipios more climatically suited to growing maize. This increase was accompanied by differentially lower rural wages, suggesting that households planted more drug crops in response to the decreased income generating potential of maize farming.
  • Topic: Agriculture, Economics, Poverty, War on Drugs, Narcotics Trafficking
  • Political Geography: Latin America, Mexico
  • Author: Juan Camilo Castillo, Daniel Mejia, Pascual Restrepo
  • Publication Date: 02-2014
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: Using the case of the cocaine trade in Mexico as a relevant and salient example, this paper shows that scarcity leads to violence in markets without third party enforcement. We construct a model in which supply shortages increase total revenue when demand is inelastic. If property rights over revenues are not well defined because of the lack of reliable third party enforcement, the incentives to prey on others and avoid predation by exercising violence increase with scarcity, thus increasing violence. We test our model and the proposed channel using data for the cocaine trade in Mexico. We found that exogenous supply shocks originated in changes in the amount of cocaine seized in Colombia (Mexico's main cocaine supplier) create scarcity and increase drug-related violence in Mexico.
  • Topic: Crime, War on Drugs, Narcotics Trafficking
  • Political Geography: Colombia, Mexico