Mexican Cartel Wars Fight for the Opioid U.S Market: Homicide rates increase along with the number of active cartels per municipality, with higher increases when a second, third, fourth and fifth cartel become active

Mexican Cartel Wars: Fighting for the Opioid U.S. Market. Fernanda Sobrino. October 25, 2019. https://www.fersobrino.com/files/DraftPaper.pdf

Abstract: The number of major Drug Trafficking Organizations in Mexico increased fromfour to nine over the last two decades. This was accompanied by an increase in drugtrade related violence. This paper examines the relationship between competition and violence in illegal drug markets. In particular, I exploit an external demand shock to the heroin market. The 2010 OxyContin reformulation made the pill harder to abuse and led some opioid abusers to switch to heroin. I construct a novel data set of cartel presence across Mexican municipalities by scraping Google News and using natural language processing. I exploit within municipality variation by combining agro-climatic conditions to grow opium poppy with heroin prices in the United States across time. Event study estimates suggest that cartel presence increases substantially after 2010 in municipalities well suited to grow opium poppy. Homicide rates increase along with the number of active cartels per municipality, with higher increases when a second, third, fourth and fifth cartel become active in the territory. These results suggest that some of the increase in violence that Mexico experienced in the last fifteen years could be attribute to criminal groups fighting for market shares of heroin and not only to changes in government enforcement.