Gangs, Labor Mobility and Development

96 Pages Posted: 21 Sep 2020

See all articles by Nikita Melnikov

Nikita Melnikov

Princeton University

Carlos Schmidt-Padilla

University of California, Berkeley

Maria Micaela Sviatschi

Princeton University

Multiple version iconThere are 2 versions of this paper

Date Written: September 2020

Abstract

We study how two of the world’s largest gangs—MS-13 and 18th Street—affect economic development in El Salvador. We exploit the fact that the emergence of these gangs 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. Using a spatial regression discontinuity design, we find that individuals living under gang control have significantly less education, material wellbeing, and income than individuals living only 50 meters away but outside of gang territory. None of these discontinuities existed before the emergence of the gangs. The results are confirmed by a difference-in-differences analysis: after the gangs’ arrival, locations under their control started experiencing lower growth in nighttime light density compared to areas without gang presence. A key mechanism behind the results is that, in order to maintain territorial control, gangs restrict individuals’ freedom of movement, affecting their labor market options. The results are not determined by exposure to violence or selective migration from gang locations. We also find no differences in public goods provision.

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Suggested Citation

Melnikov, Nikita and Schmidt-Padilla, Carlos and Sviatschi, Maria Micaela, Gangs, Labor Mobility and Development (September 2020). NBER Working Paper No. w27832, Available at SSRN: https://ssrn.com/abstract=3696200

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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