Working Paper: CEPR ID: DP17608
Authors: Erik Hornung; Eduardo Hidalgo; Pablo Selaya
Abstract: We study how NAFTA changed the geography of violence in Mexico. We propose that open borders increased trafficking profits of Mexican cartels and resulted in violent competition among them. We test this hypothesis by comparing changes in drug-related homicides after NAFTA’s introduction in 1994 across municipalities with and without drug-trafficking routes. Routes are optimal paths connecting municipalities with a recent history of drug trafficking with U.S. ports of entry. On these routes, homicides increase by 27% relative to the pre-NAFTA mean. These results cannot be explained by changes in worker’s opportunity costs of using violence resulting from the trade shock.
Keywords: violence; NAFTA; free trade; illegal trade; Mexico; conflict
JEL Codes: K42; F14; D74; O54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| NAFTA (F15) | increase in drug-related homicides (K42) |
| increase in profits from drug trafficking due to NAFTA (F69) | increase in drug-related homicides (K42) |
| NAFTA (F15) | increase in profits from drug trafficking (K42) |
| NAFTA (F15) | increase in drug-related homicides in municipalities on trafficking routes (H76) |
| longer segments of trafficking routes (F12) | higher increases in violence (J12) |