Harvard’s Melissa Dell on Globalization and Drug Trafficking – IMF F&D
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- Authors: MELISSA DELL
- Published: June 1, 2019
Overview
- Manufacturing job loss in Mexico, resulting from increasing trade competition with China in the US market, can fuel drug trafficking and violence.
- The analysis is based on research by Melissa Dell with Benjamin Feigenberg and Kensuke Teshima that examines how changes in urban manufacturing job opportunities affected drug-trade-related violence in Mexico.
- The findings emphasize that while international trade brings substantial benefits, trade-induced local labor-market shocks can carry large social costs, particularly in countries with weaker social safety nets and institutions.
Evidence and findings
- Trade competition in the US market between Mexico and China damped local manufacturing employment opportunities in Mexico in ways that are uncorrelated with preexisting trends in drug trafficking and violence.
- Counterfactual estimate: if Chinese exports to the United States had not risen significantly during 2007–10, the increase in drug-related homicides in the 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 is concentrated in municipalities with a transnational drug gang presence; there is no impact on overall and drug-related homicides in municipalities where no known drug trade operations existed initially.
- Municipalities where employment opportunities decline also experience a large increase in cocaine seizures, used as a proxy for cocaine traffic absent major changes in enforcement.
Mechanisms and interpretation
- Declines in the opportunity cost of criminal employment make drug trafficking more lucrative and facilitate gangs’ mobilization of local labor (e.g., lookouts), increasing incentives for territorial conflict among criminal organizations or factions.
- The Gary Becker–style economic-incentives framework aids interpretation: weak labor-market options raise expected returns to illegal activity.
- The analysis distinguishes urban manufacturing job shocks from rural insurgency dynamics; findings align with stronger opportunity–crime links in poorer economies with weaker institutions.
Policy implications and recommendations
- Strengthen social safety nets for workers displaced by trade competition or technological change to improve outside options and reduce criminality.
- Ensure productivity and income gains from globalization are shared, including through education and training targeted to low-skilled youth in more exposed sectors.
- Combine national and international measures: countries with weak institutions may lack resources to mitigate shocks alone, so international collaboration is needed to reduce cross-border reverberations and develop practical mitigation approaches.
- Governments, civil society, and the international community must work together to reduce the social impact of economic integration.
Key statistics and references (as presented)
- Over 100,000 lives claimed in Mexico by conflicts over drug trafficking (Beittel 2017).
- Drug-related homicides in sample: about 6,000 in 2007 and more than 20,000 in 2010.
- Counterfactual reduction estimate: about 27 percent lower in the absence of the rise in Chinese exports to the United States during 2007–10.
- References cited in the source: Beittel 2017; Dell, Feigenberg, and Teshima (forthcoming); Draca and Machin 2015; Dube, García-Ponce, and Thom 2016; Igarapé Institute 2017.
Source: Harvard’s Melissa Dell on Globalization and Drug Trafficking – IMF F&D
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