Abstract
This paper examines the effects of drug-related crimes on employment in Mexico at the state level during the period 2005–2014. Results indicate that such crimes have a negative impact on employment. We are able to decompose employment into low-skilled and high-skilled employment, and results are heterogeneous among both types of employment. Results indicate that a 10% increase in drug-related crimes reduces total employment up to 0.9%. Additionally, our empirical findings indicate that high-skilled employment is more sensitive to an increase in drug-related violence than low-skilled employment. Low-skilled employment decreases up to 0.3%, while skilled employment declines up to 1.5% when drug-related violence increases by 10%. It is also found that skilled employment responds at an increasing rate when drug violence skyrockets. We also find that a rise in drug-related crimes increases wages as a mechanism to retain jobs in violent places.
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Source: Own estimations with data from ENOE and Secretariado Ejecutivo del Sistema Nacional de Seguridad Publica
Source: Elaborated using data from the Mexican National Public Security Executive Office, Mexican Interior Ministry
Source: Own estimations
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Notes
These 32 federal entities are: Aguascalientes, Baja California, Baja California Sur, Campeche, Ciudad de Mexico, Chiapas, Chihuahua, Coahuila de Zaragoza, Colima, Durango, Guanajuato, Guerrero, Hidalgo, Jalisco, Mexico, Michoacan de Ocampo, Morelos, Nayarit, Nuevo Leon, Oaxaca, Puebla, Queretaro, Quintana Roo, San Luis Potosi, Sinaloa, Sonora, Tabasco, Tamaulipas, Tlaxcala, Veracruz de Ignacio de la Llave, Yucatan and Zacatecas.
Property crime, kidnapping crimes, homicide crimes, robbery crimes and total crime.
Instituto Nacional de Estadistica y Geografia, or INEGI for its Spanish acronym. Encuesta Nacional de Ocupacion y Empleo, or ENOE for its Spanish acronym. ENOE is a comprehensive household-based survey that tracks labor market conditions in Mexico. ENOE covers both formal and informal employments. Thus, ENOE constitutes the most reliable database in Mexico on employment figures.
Total subordinated employment includes employees with no education and employees with any education level. Low-skilled jobs include just elementary school; at the same time skilled jobs include high school and bachelor degree. Middle school is not included in the analysis as neither low-skilled nor high-skilled jobs.
According to ENOE, subordinated employment is an employee with a salary who is ranked below another employee in terms of firms’ hierarchy.
Instituto Mexicano del Seguro Social, or IMSS for its Spanish acronym.
The matrix of distances between state “I” and the other states in the country was calculated using Google map and calculating the distance between the governor state building in state “i” and the distance with the other governor state buildings in the remaining states.
Indicador Trimestral de la Actividad Economica Estatal, or ITAEE for its Spanish acronym.
Estadísticas Judiciales en Materia Penal.
We conducted similar analysis for the other regressions in the paper and found similar results. This implies that the instrument is not related to the error terms across model specifications. This analysis is not included in the paper in the spirit of brevity, but results are available upon request.
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Data sources
Data source of interest rates and the real exchange rate. http://www.banxico.org.mx/estadisticas/index.html. Accessed Apr 2015
Data source for the different employment categories, state economic activity, wages and state prison population. http://www.inegi.org.mx/sistemas/bie/. Accessed Apr 2015
Data source of State FDI. http://www.economia.gob.mx/comunidad-negocios/competitividad-normatividad/inversion-extranjera-directa/estadistica-oficial-de-ied-en-mexico. Accessed May 2015
Data source of the different crime categories. http://secretariadoejecutivo.gob.mx/index.php. Accessed May 2015
Acknowledgements
Any views expressed here are solely those of the authors and do not necessarily reflect those of the Federal Reserve Bank of Dallas or the Federal Reserve System. The authors wish to thank two anonymous referees from this journal, for helpful comments on a previous version of this paper.
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Coronado, R., Saucedo, E. Drug-related violence in Mexico and its effects on employment. Empir Econ 57, 653–681 (2019). https://doi.org/10.1007/s00181-018-1458-z
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DOI: https://doi.org/10.1007/s00181-018-1458-z