Trafficking Networks and the Mexican Drug War

This is Melissa Dell's job market paper, Trafficking Networks and the Mexican Drug War

The abstract:

Drug trade-related violence has escalated dramatically in Mexico during the past five years, claiming 40,000 lives and raising concerns about the capacity of the Mexican state to monopolize violence. This study examines how drug traffickers’ economic objectives influence the direct and spillover effects of Mexican policy towards the drug trade. By exploiting variation from close mayoral elections and a network model of drug trafficking, the study develops three sets of results. First, regression discontinuity estimates show that drug trade-related violence in a municipality increases substantially after the close election of a mayor from the conservative National Action Party (PAN), which has spearheaded the war on drug trafficking. This violence consists primarily of individuals involved in the drug trade killing each other. The empirical evidence suggests that the violence reflects rival traffickers’ attempts to wrest control of territories after crackdowns initiated by PAN mayors have challenged the incumbent criminals. Second, the study accurately predicts diversion of drug traffic following close PAN victories. It does this by estimating a model of equilibrium routes for trafficking drugs across the Mexican road network to the U.S. When drug traffic is diverted to other municipalities, drug trade-related violence in these municipalities increases. Moreover, female labor force participation and informal sector wages fall, corroborating qualitative evidence that traffickers extort informal sector producers. Finally, the study uses the trafficking model and estimated spillover effects to examine the allocation of law enforcement resources. Overall, the results demonstrate how traffickers’ economic objectives and constraints imposed by the routes network affect the policy outcomes of the Mexican Drug War.

Some numbers:

. . . the probability that a drug trade-related homicide occurs in a municipality in a given month is 8.4 percentage points higher after a PAN mayor takes office than after a non-PAN mayor takes office.

. . . the presence of a predicted drug trafficking route increases the value of illicit drug confiscations in a given municipality-month by around 18.5 percent.

Slate has an article on the paper:

What happens when a law-and-order mayor gets elected? All hell breaks loose: Dell estimates that the drug-related homicide rate almost doubles relative to “control” towns where the PAN wasn’t elected. And it’s not the result of traffickers warring with police, but rather traffickers fighting with each other. Dell conjectures—based on anecdotal evidenceabout the drug war—that police efforts tend to weaken a cartel’s grip on a town just enough that competing traffickers see an opening to come in and fight for control of the town. Indeed, when a rival cartel controls a neighboring town, the effect of a PAN win on the drug-related homicide rate is several times higher.

This map shows drug trade routs: 

Fascinating !!! I have also posted about another great paper of hers: "The Long Run Effects of Historical Institutions." She is doing amazing work. 
HT: Chris Blattman's Blog.