## Globalization and Narcos

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**Canonical URL:** [Globalization and Narcos](https://www.imf.org/-/media/files/publications/fandd/article/2019/june/globalization-and-drug-trafficking-dell.pdf)

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### Summary of the research question and context
- Examines how Mexican manufacturing job loss—resulting from increasing trade competition with China in the US market—affected drug-trade-related violence in Mexico.
- Places the analysis in the context of Mexico’s recent explosion of drug violence, which has claimed over 100,000 lives (Beittel 2017).
- Motivated by policy debate emphasizing job creation (for example, Andrés Manuel López-Obrador’s platform) as a strategy to reduce drug-related violence.

### Key empirical findings
- Trade-driven job loss materially increased drug-related homicides in Mexico:
  - If Chinese exports to the United States had not risen significantly during 2007–10, the increase in drug-related homicides in the study sample—totaling about 6,000 in 2007 and more than 20,000 in 2010—would have been about 27 percent lower.
- Effects are larger where international competition disproportionately affects young, less-educated men, consistent with this subgroup’s high propensity to participate in the illegal sector.
- Impact concentrated in municipalities with a transnational drug gang presence; no impact on overall and drug-related homicides in municipalities where no known drug trade operations existed initially.
- Municipalities experiencing employment declines also show a large increase in cocaine seizures, used as a proxy for cocaine traffic in the absence of major changes in enforcement.

### Mechanisms and interpretation
- Declining local labor market opportunities lower the opportunity cost of criminal employment, making drug trafficking more lucrative and increasing local labor mobilization for trafficking (notably lookouts).
- Greater profitability and labor availability encourage criminal organizations, or factions within them, to fight for territorial control, driving violent conflict.
- The findings support an economic-incentives view of violent criminality (a Gary Becker–style approach).

### Policy implications and recommendations
- Strengthening the social safety net for workers displaced by trade competition or technological change could reduce criminality by improving outside options for displaced workers.
- National policies should ensure that productivity and income gains from globalization are shared, including through education and training for low-skilled youth employed in more exposed sectors.
- Many affected countries have weak institutions and limited resources; therefore, national efforts should be complemented by international measures.
- Governments, civil society, and the international community must collaborate to reduce the social impact of economic integration and develop practical approaches to mitigate the costs.

### Broader conclusions
- Manufacturing job loss resulting from international competition can carry large social costs in developing economies with weak institutions.
- In the coming years, countries with weak institutions may be hit hardest by worker displacement from economic integration and technological change, with nonstate actors poised to exploit such shocks.
- Sustainable economic integration requires collaborative, innovative approaches to navigate distributional and social challenges.

*Melissa Dell, “Globalization and Narcos,” Finance & Development, June 2019.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2019/june/globalization-and-drug-trafficking-dell.pdf_