Homicide and Work: The Impact of Mexico's Drug War on Labor Market Participation

Abstract

We estimate the impact of the escalation of the drug war in Mexico on the mean hours worked among the general population. We focus on homicides and exploit the variation in the trajectory of violence across states to identify a relationship between changes in homicides and hours worked. Using fixed effects and instrumental variables regressions, we find the increase in homicides has reduced average hours worked by 1-2%. These impacts are larger for the self-employed, specifically those who work from home. This provides evidence that the fear of violence can lead to behavioral changes that lower economic activity.

Keywords: Crime, Labor force participation, Mexico

JEL Classification: J22, O12, O54