Working Paper: NBER ID: w20067
Authors: Nicols Ajzenman; Sebastian Galiani; Enrique Seira
Abstract: This is the first paper to study the economic effects of drug-trafficking organization violence. We exploit the manyfold increase in homicides in 2008-2011 in Mexico resulting from its war on organized drug traffickers to estimate the effect of drug-related homicides on house prices. We use an unusually rich dataset that provides national coverage on house prices and homicides and exploit within-municipality variations. We find that the impact of violence on housing prices is borne entirely by the poor sectors of the population. An increase in homicides equivalent to one standard deviation leads to a 3% decrease in the price of low-income housing. In spite of this large burden on the poor, the willingness to pay in order to reverse the increase in drug-related crime is not high. We estimate it to be approximately 0.1%of Mexico's GDP.
Keywords: No keywords provided
JEL Codes: I3; K4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| drug-related homicides (DRHs) (I12) | house prices (R31) |
| increase in drug-related homicides (DRHs) (I12) | decrease in house prices for low-quality housing (R31) |
| long-term increases in violence (H56) | larger negative effects on housing prices for the poor (R28) |
| burden of violence (I14) | low-income households (R20) |
| willingness to pay (WTP) to eliminate increase in DRHs (J39) | low (C51) |