Foreign Investment and Organized Crime (Mexico)

Organized crime is a disincentive for investment and business activity. We use murders as a proxy for presence of regional organized crime and study the relation between direct foreign investment and organized crime for different industries in Mexico. Our contribution is the focus on sectoral differences. The data is for net foreign direct investment from 116 countries into the 32 Mexican states from 2004 to 2010. Imputing causality, we find that organized crime deters foreign investment in financial services, commerce, and agriculture, but not oil and mining sectors for which we find increased crime associated with increased investment. There is no effect of organized crime on foreign investment in manufacturing.

Source: Ashby & Ramos (European Journal of Political Economy, June 2013)

Using Google to track Mexican drug trafficking organizations

From a working paper by Coscia & Rios (October 2012):

We develop a tool that uses Web content to obtain quantitative information about the mobility and modus operandi of criminal groups, information that would otherwise require the operation of large scale, expensive intelligence exercises to be obtained. Exploiting indexed reliable sources such as online newspapers and blogs, we use unambiguous query terms and Google’s search engine to identify the areas of operation of criminal organizations, and to extract information about the particularities of their mobility patters. We apply our tool to Mexican criminal organizations to identify their market strategies, their preferred areas of operation, and the way in which these have evolved over the last two decades. . . 

Interesting findings: 

This tendency towards invading territories that are already taken is even stronger for the fourth cluster, integrated by Zetas and Golf organizations. We called these organizations “Expansionary competitive” because they are not only the most competitive but also the ones with the largest tendencies to explore new territories. In other words, they do not only try to invade others’ territories but also are the first to colonize new markets and to operate in areas where drug trafficking organizations had never been present before. In general, this last cluster is the one with the largest criminal organizations, operating on average on 324 municipalities (as of 2012) and spreading to an average of 38.87 new municipalities every year. Yet, it is also important to mention that their mobility is also the largest, they abandon an average of 22 municipalities per year, lasting only an average of 2.86 years in each one of them.

From the conclusion:

We showed that criminal organizations, rather than being similar and operate under identical mechanics, differ significantly in their market orientations. We identified four types of Mexican criminal organizations: traditional, new, competitive and expansionary competitive. Traditional organizations operate in municipalities that they control since long time ago, on average since 1995. New organizations have only being in operation since 2007 on average, and tend to operate in municipalities where other criminal organizations had at some time being present but were abandoned. Competitive organizations are those that operate in territories are controlled by other organizations. Finally, expansion- ary competitive are those not only operate in territories that were already taken but also explore new territories, expanding their operations to areas that were drug trafficking organizations had never operated before. . .  

The full title is "How and where do criminals operate? Using Google to track Mexican drug trafficking organizations."

The economic cost of organized crime

The graph below is from a fascinating paper by Paolo Pinotti, the full titles is: "The economic costs of organized crime: evidence from southern Italy" (April 2012):

The author explains:

This graph shows the relationship between organized crime and GDP per capita across Italian regions. Bold triangles denote regions with a historical presence of mafia organizations, hollow triangles denote regions with a more recent presence while circles denote all other regions.

Another illustrative graph - mafia allegations vs homicide rate:

Another one: 

The graph compares the time series of GDP per capita in Apulia and Basilicata (“actual with mafia”) and in a synthetic control that is a weighted average of the other Italian regions excluding those with a historical presence of mafia-type organizations (Sicily, Campania and Calabria) . . .

The author concludes:

The results suggest that the aggregate loss implied by the presence of organized crime amounts to a significant reduction of GDP per capita and goes mainly through a reallocation from private economic activity to (less productive) public investment.

I find this map intriguing:

Why is this map intriguing? Contrast it with the map below:
Map of civic capital:

There is an obvious negative geographic relationship between organized crime activity and measures of civic capital, which is not taken into consideration in Pinotti's paper.