On the Distributed Costs of Drug-Related Homicides

46 Pages Posted: 24 Jun 2014

See all articles by Nicolas Ajzenman

Nicolas Ajzenman

Getulio Vargas Foundation (FGV) - Sao Paulo School of Economics; IZA Institute of Labor Economics

Sebastian Galiani

University of Maryland - Department of Economics

Enrique Seira

Stanford University - Department of Economics

Multiple version iconThere are 4 versions of this paper

Date Written: May 13, 2014

Abstract

Reliable estimates of the effects of violence on economic outcomes are scarce. We exploit the manyfold increase in homicides in 2008-2011 in Mexico resulting from its war on organized drug traffickers to estimate the effect of drug-related homicides on house prices. We use an unusually rich dataset that provides national coverage on house prices and homicides and exploit within-municipality variations. We find that the impact of violence on housing prices is borne entirely by the poor sectors of the population. An increase in homicides equivalent to one standard deviation leads to a 3% decrease in the price of low-income housing. In spite of this large burden on the poor, the willingness to pay in order to reverse the increase in drug-related crime is not high. We estimate it to be approximately 0.1% of Mexico’s GDP.

Keywords: drug-related homicides, costs of crime, poverty

JEL Classification: K4, I3

Suggested Citation

Ajzenman, Nicolás and Galiani, Sebastian and Seira, Enrique, On the Distributed Costs of Drug-Related Homicides (May 13, 2014). Center for Global Development Working Paper No. 364, Available at SSRN: https://ssrn.com/abstract=2458122 or http://dx.doi.org/10.2139/ssrn.2458122

Nicolás Ajzenman (Contact Author)

Getulio Vargas Foundation (FGV) - Sao Paulo School of Economics ( email )

Rua Itapeva 474 s.1202
São Paulo, São Paulo 01332-000
Brazil

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Sebastian Galiani

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

Enrique Seira

Stanford University - Department of Economics ( email )

Stanford, CA 94305
United States

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