Working Paper: NBER ID: w27832
Authors: Nikita Melnikov; Carlos Schmidt-Padilla; Maria Micaela Sviatschi
Abstract: We study how territorial control by criminal organizations affects economic development. We exploit a natural experiment in El Salvador, where the emergence of these criminal organizations was the consequence of an exogenous shift in American immigration policy that led to the deportation of gang leaders from the United States to El Salvador. Upon arrival, the gangs gained control over many urban areas and re-created a system of borders to protect their territory from outsiders. Using a spatial regression discontinuity design, we find that individuals in gang-controlled neighborhoods have less material well-being, income, and education than individuals living only 50 meters away but outside of gang territory. None of these discontinuities existed before the arrival of the gangs. A key mechanism behind the results is that gangs restrict individuals’ mobility, affecting their labor market options by preventing them from commuting to other parts of the city. The results are not determined by high rates of selective migration, differential exposure to extortion and violence, or differences in public goods provision.
Keywords: gangs; labor mobility; economic development; El Salvador
JEL Codes: O10; O17; O54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Gang territorial control (P37) | Material well-being (I31) |
| Gang territorial control (P37) | Income (D31) |
| Gang territorial control (P37) | Education (I29) |
| Gang territorial control (P37) | Mobility restrictions (J62) |
| Mobility restrictions (J62) | Labor market options (J68) |
| Gang territorial control (P37) | Ownership of durable goods (D14) |
| Gang territorial control (P37) | Socioeconomic gaps (I24) |