Gangs, Labor Mobility, and Development

63 Pages Posted: 8 Nov 2019

See all articles by Nikita Melnikov

Nikita Melnikov

Princeton University

Carlos Schmidt-Padilla

University of California, Berkeley

Maria Micaela Sviatschi

Princeton University

Date Written: October 29, 2019

Abstract

We study the effects that two of the largest gangs in Latin America, MS-13 and 18th Street, have on economic development in El Salvador. We exploit the fact that the emergence of gangs in El Salvador was in part the consequence of an exogenous shift in US immigration policy that led to the deportation of gang leaders from the United States to El Salvador. Using the exogenous variation in the timing of the deportations and the boundaries of the territories controlled by the gangs, we perform a spatial regression discontinuity design and a difference-in-differences analysis to estimate the causal effect that living under the rule of gangs has on development outcomes. Our results show that individuals living under gang control have significantly worse education, wealth, and less income than individuals living only 50 meters away in areas not controlled by gangs. None of these discontinuities existed before the arrival of gangs from the US. The results are not determined by exposure to violence, lower provision of public goods, or selective migration away from gang locations. We argue that our findings are mostly driven by gangs restricting residents' mobility and labor choices. We find that individuals living under the rule of gangs have less freedom of movement and end up working in smaller firms. The results are relevant for many developing countries where non-state actors control parts of the country.

Keywords: Gangs, Development, Latin America, MS-13, Crime, Mobility

Suggested Citation

Melnikov, Nikita and Schmidt-Padilla, Carlos and Sviatschi, Maria Micaela, Gangs, Labor Mobility, and Development (October 29, 2019). Available at SSRN: https://ssrn.com/abstract=3477097 or http://dx.doi.org/10.2139/ssrn.3477097

Nikita Melnikov (Contact Author)

Princeton University ( email )

Princeton, NJ 08544-1021
United States

Carlos Schmidt-Padilla

University of California, Berkeley

210 Barrows Hall
Berkeley, CA 94720
United States

Maria Micaela Sviatschi

Princeton University ( email )

22 Chambers Street
Princeton, NJ 08544-0708
United States

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