Mexican drug cartels: We see a positive connection between cartel presence & better socioeconomic outcomes at the municipality level; results help understand why drug lords have great support in the communities in which they operate

Following the poppy trail: Origins and consequences of Mexican drug cartels. Tommy E. Murphy, Martín A. Rossi. Journal of Development Economics, Volume 143, March 2020, 102433. https://doi.org/10.1016/j.jdeveco.2019.102433

Highlights
•    We study the origins, and economic and social consequences of Mexican drug cartels.
•    The location of current cartels is strongly linked to the location of Chinese migration at the beginning of the 20th century.
•    We report a positive connection between cartel presence and better socioeconomic outcomes at the municipality level.
•    Our results help to understand why drug lords have great support in the local communities in which they operate.

Abstract: This paper studies the origins, and economic and social consequences of some of the most prominent drug trafficking organizations in the world: the Mexican cartels. It first traces the current location of cartels to the places where Chinese migrated at the beginning of the 20th century, discussing and documenting how both events are strongly connected. Information on Chinese presence at the beginning of the 20th century is then used to instrument for cartel presence today, to identify the effect of cartels on society. Contrary to what seems to happen with other forms of organized crime, the IV estimates in this study indicate that at the local level there is a positive link between cartel presence and better socioeconomic outcomes (e.g. lower marginalization rates, lower illiteracy rates, higher salaries), better public services, and higher tax revenues, evidence that is consistent with the known stylized fact that drug lords tend have great support in the local communities in which they operate.

JEL classification: N36, O15