|RELATED TOPICS:||Poverty Reduction and Labor|
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This study contends that in Mexico there is a threshold above which drug-trafficking-related violence causes a general slowdown in the economy. Before that threshold is reached, firms and individuals pay for the increase in violence via protective security costs, a decision that is reflected in the job market. Once violent conflict has escalated to a substantial degree, economic agents’ medium- and long-term decision making is negatively affected, revealing a significant contraction in the economy. Using two different empirical strategies, this study proposes electricity consumption as an indicator of local economic activity. To estimate the marginal effects of violence on the economy, an instrumental variables regression is utilized; this regression uses as exogenous variation a tool developed by Mejía and Castillo (2012), which is based on record seizures of Colombian cocaine. To estimate the “threshold” effects of drug violence on the economy, a synthetic control method is used which consists of constructing counterfactual scenarios as an optimal weighted average of control units. It is found that an increase in the levels of violence has significant, negative effects on labor force participation and employment. It is also found that cities that experienced a dramatic spike in violence between 2006 and 2010 sharply curtailed their energy consumption in the years following the spike.
The Research Department is pleased to present the latest edition of its newsletter, Ideas for Development in the Americas (IDEA). This issue is based on the IDB's 2004 report on Economic and Social Progress in Latin America, which focuses on the problems surrounding people and their jobs. The report presents an anatomy of Latin American labor markets, a diagnosis of their ills, and prescriptions f ... (View publication)
An influential body of scholarship argues that corruption behaves as a selffulfilling prophecy. The idea of this work is that levels of corruption emerge endogenously as a result of a society-wide coordination game in which the individual returns to corrupt behavior are a function of how disposed towards corruption the other members of society are perceived as being. An empirical implication of th ... (View publication)
Using individual data on persons arrested in the Medellin Metropolitan Area, this paper assesses whether the change in punishment at age 18, mandated by law, has a deterrent effect on arrests. No deterrent effect was found on index, violent or property crimes, but a deterrence effect was found on non-index crimes, specifically those related to drug consumption and trafficking. The change in crimin ... (View publication)
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