Scarcity Without Leviathan: The Violent Effects of Cocaine Supply Shortages in the Mexican Drug War

Abstract

This paper asks whether scarcity increases violence in markets that lack a centralized authority. We construct a model in which, by raising prices, scarcity fosters violence. Guided by our model, we examine the link between scarcity and violence in the Mexican cocaine trade. At a monthly frequency, scarcity created by cocaine seizures in Colombia-Mexico's main cocaine supplier-increases violence in Mexico. The effects are larger in municipalities near the US, with multiple cartels, and with strong PAN support. Between 2006 and 2009 the decline in cocaine supply from Colombia could account for 10%-14% of the increase in violence in Mexico.

Drugs Around the Corner: Domestic Drug Markets and Violence in Colombia and Mexico

“…In Colombia, traffickers have turned to local markets, such as domestic drugs and extortion, to lower their profile and avoid state attention (Rico 2013). It is interesting to note that at least in theory, while Colombian traffickers' profits have decreased, those of Mexican traffickers have increased as they become more prominent in cocaine trafficking and respond to supply shortages (Castillo et al 2014). Therefore it would not make much sense to argue that in both cases, traffickers have resorted to domestic distribution just to supplement income.…”

“…While the automatic connection between domestic drug markets and violence is more prevalent in policy circles than in academia, some analysts tend to establish a direct link between drug trafficking and violence (Angrist and Kuegler 2008;Naim 2006) or to emphasize that violence is predominantly a result of the size and revenue associated with an illegal market (Castillo et al 2014). Studies analyzing violence in Latin America, although they recognize its complex causes, tend to identify a direct connection between growth in drug trafficking and growth in violence, or lack systematic explanations for variation in drug violence (Briceño-León and Zubillaga 2002;Koonings and Kruijt 2007, 16).…”

The Incumbency Curse: Weak Parties, Term Limits, and Unfulfilled Accountability

“…We collected the data from Peru, Costa Rica and Chile directly from primary sources. We thank the authors in Castillo, Mejía, and Restrepo (2014) for kindly sharing their data on Mexican elections. We obtained the data on Colombian elections from the Centro de Estudios sobre Desarrollo Económico (CEDE) at Universidad de Los Andes (Pachón and Sánchez 2014).…”

Yet another dimension of the ineffectiveness of supply-side interventions in illegal drug markets

“…However, in order to have confidence in the estimated effects of enforcement on drug prices, future research should put more emphasis upon rigorous evaluations that take endogeneity issues seriously. This challenge is especially important given the growing evidence that shows that tougher enforcement against illegal drug markets causes more violence [Calderón et al ., unpublished, ]. If it is true that the demand for drugs is price inelastic, curbing supply would increase prices more than it reduces quantities, thus increasing drug market revenues and the incentives to use violence to control these rents.…”