Publication: Firms and Labor in Times of Violence: Evidence from the Mexican Drug War
Loading...
Published
2024-09-11
ISSN
0258-6770 (print)
1564-698X (online)
1564-698X (online)
Date
2025-08-07
Author(s)
Editor(s)
Abstract
This paper examines the impact of violence resulting from drug trafficking on manufacturing firms in an emerging economy. By utilizing comprehensive longitudinal data spanning all of Mexico from 2005 to 2010 and employing an instrumental variable strategy that leverages plausibly exogenous spatiotemporal variations in the homicide rate during the outbreak of drug violence, the analysis reveals a significant negative effect of violence on plant output, employment, product scope, and capacity utilization. The negative effect on employment is entirely driven by blue-collar employment and concentrated among low-wage, female-intensive firms. Further, consistent with a violent-environment-induced blue-collar labor-supply shock, the results show positive effects on blue-collar wages and negative effects on white-collar wages at the firm level. Output resilience to violence is also shown to be lower among labor-intensive, domestically selling and sourcing, less diversified firms. These findings show that the rise of drug violence has a significant negative effect on the development of domestic industrial capability in Mexico and shed light on the characteristics of the most affected firms and the channels through which they are affected.
Link to Data Set
Citation
“Utar, Hale. 2024. Firms and Labor in Times of Violence: Evidence from the Mexican Drug War. World Bank Economic Review. © World Bank. http://hdl.handle.net/10986/43559 License: CC BY-NC-ND 3.0 IGO.”
Digital Object Identifier
Associated URLs
Associated content
Other publications in this report series
Journal
World Bank Economic Review
1564-698X
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
No results found.
Users also downloaded
Showing related downloaded files
Publication Thailand Monthly Economic Monitor, January 2025(Washington, DC: World Bank, 2025-02-04)November economic activity data suggests gradual growth, driven by strong external demand, particularly for goods exports and tourism, as well as a slight recovery in private consumption supported by fiscal stimulus. While tourism remained a key growth driver, with a notable increase in arrivals, manufacturing continued to contract, particularly in the automotive sector. Amid stronger private consumption, inflation picked up but stayed below the central bank's target. On the policy front, the Bank of Thailand maintained its policy rate and the government introduced measures to alleviate household debt pressures. The Thai baht appreciated due to the rising current account surplus, despite ongoing portfolio outflows.Publication Digital Opportunities in African Businesses(Washington, DC: World Bank, 2024-05-16)Adoption of digital technologies is widely acknowledged to boost productivity and employment, stimulate investment, and promote growth and development. Africa has already benefited from a rapid diffusion of information and communications technology, characterized by the widespread adoption of mobile phones. However, access to and use of digital technology among firms is uneven in the region, varying not just among countries but also within them. Consequently, African businesses may not be reaping the full potential benefits offered by ongoing improvements in digital infrastructure. Using rich datasets, “Digital Opportunities in African Businesses” offers a new understanding of the region’s incomplete digitalization—namely, shortfalls in the adoption and effective use of digital technology by firms to perform productive tasks. The research presented here also highlights the challenges in addressing incomplete digitalization, finding that the cost of machinery, equipment, and software, as well as the cost of connectivity to the internet, is significantly more expensive in Africa than elsewhere. “Digital Opportunities in African Businesses” outlines ways in which the private sector, with support from policy makers, international institutions, and regulators, can help bring down these costs, stimulating more widespread digitalization of the region’s firms, thereby boosting productivity and, by extension, economic development. This book will be relevant to anyone with an interest in furthering digitalization across Africa.Publication Impact Evaluation in International Development(Washington, DC: World Bank, 2022-03-17)Impact evaluations are studies that attempt to measure the causal impact of a project, program, or policy on one or more outcomes. This book provides a comprehensive exposition of how to conduct impact evaluations. Part I provides an overview of impact evaluations and comprises five chapters which are accessible to readers who have few or none of the technical (statistical and econometric) skills that are needed to conduct impact evaluations. Parts II and III make use of statistical and econometric methods and are at a level similar to a graduate-student course but written to make them accessible to the ambitious reader whose skills are not at that level. Part II presents, in Chapters 6-10, a comprehensive discussion of the use of randomized controlled trials (RCTs) to conduct impact evaluations, including a general discussion of the ethical issues involved in conducting impact evaluations. Part III presents the main nonexperimental methods that are used to implement impact evaluations when RCTs are not feasible or not recommended for other reasons. Chapters 11 and 12 present regression methods, including difference-in-differences estimation. Matching methods are described in Chapter 13, after which regression discontinuity methods are covered in Chapter 14. Instrumental variable methods, including the estimation of local average treatment effects (LATE), are discussed in detail in Chapter 15. Chapters 16 and 17 cover more advanced topics: quantile treatment effects and control function methods, respectively. Part IV then considers more practical issues when conducting impact evaluations, including designing questionnaires (Chapter 18), data collection methods and survey management (Chapters 19 and 20), and disseminating results to policymakers (Chapter 21). Finally, Part V addresses two topics in impact evaluation: qualitative methods for conducting impact evaluations (Chapter 22), and cost-benefit and cost-effectiveness analysis (Chapter 23).Publication Africa's Pulse, No. 31, Spring 2025: Improving Governance and Delivering for People in Africa(Washington, DC: World Bank, 2025-04-23)Amid global economic uncertainty and limited fiscal space in the region, Sub-Saharan Africa's economic activity is showing some resilience, with projected growth gradually increasing over 2025-2027 period. This growth is driven primarily by a rise in private demand, alongside a reduction in inflation rates and stable currencies. However, growth has been unable to reduce poverty and meet people's aspirations. The region is also grappling with persistent challenges, including political unrest and escalating demands for adequate economic opportunities, as reflected in a surge in protests over the past decade and a notable rise in coups since 2000. These dynamics highlight the urgent need for a renewed social contract between governments and citizens, emphasizing efficient public spending, better governance, and transparent market regulations to foster job creation and sustainable economic growth. African governments must prioritize governance reforms to maintain growth momentum and restore public trust. The report underscores the importance of strategic investments and complementary policies that bolster human capital, improve public services, and create a fair tax system, thereby fostering a business environment that supports growth and job creation.Publication Fixing Markets, Not Prices(World Bank, Washington, DC, 2021-06-30)Collusive agreements among firms slow productivity growth, undermine economic efficiency, and hinder poverty reduction. When competitors agree to limit competition by forming economic cartels, poor households may pay up to 50 percent more for essential goods. Despite their numerous adverse consequences, cartels remain common across many markets. In many LAC countries, policies to foster competition and eliminate cartels are weakly enforced or nonexistent. However, recent successes in cartel detection offer new insight into how to police and prevent collusive agreements. As they implement aggressive and far-reaching post-pandemic recovery efforts, LAC countries have an opportunity to establish a foundation for competitive markets that incentivize efficiency and deliver broad-based gains in employment and income. This report provides novel evidence on the prevalence of cartels in LAC and offers concrete policy options for identifying and breaking up cartels that reflect the country context and market realities. This report draws on a new, comprehensive dataset of cartel agreements uncovered in LAC over the last four decades and presents a sequence of policy options for dismantling cartels and preventing cartel formation. The report also offers tools to guide policymakers in deciding which policy options are most appropriate to the local context, including a taxonomy of factors that facilitate cartelization and an index to gauge the institutional independence of competition authorities.