Scarcity Without Leviathan: The Violent Effects of Cocaine Supply Shortages in the Mexican Drug War

45 Pages Posted: 17 Mar 2014 Last revised: 3 Oct 2018

See all articles by Juan Camilo Castillo

Juan Camilo Castillo

Stanford University - Department of Economics

Daniel Mejia

Universidad de los Andes, Colombia - Department of Economics

Pascual Restrepo

Boston University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: September 24, 2018

Abstract

This paper explores if scarcity increases violence in markets without a centralized authority. We construct a model in which, by raising prices and revenues, temporal supply shortages foster violence. Guided by our model, we examine empirically the link between scarcity and violence in the Mexican cocaine trade. At a monthly frequency, scarcity created by cocaine seizures in Colombia—Mexico’s main supplier of cocaine— increases violence in Mexico. The effects are larger in municipalities near the US border, with multiple cartels, and with strong PAN support—the party that spearheaded the crackdown on the cocaine trade between 2006 and 2012. Our estimates imply that, between 2006 and 2009, the sharp decline in cocaine supply from Colombia could account for 10%-14% of the increase in violence in Mexico and 25% of the differential increase of violence in the north of Mexico relative to the rest of the country.

Keywords: War on Drugs, Violence, Illegal Markets, Mexico, Cocaine Trade

JEL Classification: D74, K42

Suggested Citation

Castillo, Juan Camilo and Mejia, Daniel and Restrepo, Pascual, Scarcity Without Leviathan: The Violent Effects of Cocaine Supply Shortages in the Mexican Drug War (September 24, 2018). Available at SSRN: https://ssrn.com/abstract=2409268 or http://dx.doi.org/10.2139/ssrn.2409268

Juan Camilo Castillo

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States

Daniel Mejia

Universidad de los Andes, Colombia - Department of Economics ( email )

Carrera 1 No. 18 A - 10
Bogotá, AA4976
Colombia
57(1)3394949 ext 3737 (Phone)
57(1)3324492 (Fax)

HOME PAGE: http://economia.uniandes.edu.co/share/scripts/home/home.php

Pascual Restrepo (Contact Author)

Boston University - Department of Economics ( email )

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