7), we find a similar effect, although larger in terms of magnitude. For example, a unit increase in inequality increases the total number of homicides by more than 6 deaths. In the case of drug-related homicides a unit increase in inequality now leads to more than 13 deaths (instead of 10 when using Food Poverty).

# Effects in Urban and Rural Areas

Scholars have shown that crime rates tend to be higher in large cities than in rural or small urban areas of the United States because the pecuniary benefits for crime are higher in the former than in the latter (Glaeser and Sacerdote, 1996). At the same time, non-pecuniary factors such as lower arrest probabilities and different family structures in large cities also tend to explain a large share of the crime rate gap across these areas; while this share varies by type of crime. Guerrero (2011) points out that drug-related organization in Mexico have broadened their scope of activities to other violent crimes (e.g., kidnapping, extortion, and vehicle theft), which in many cases are associated with increases in the homicide rate. This fact together with the lower costs associated with criminal activity during Mexico’s Drug War imply that the effect of inequality on crime may have been different across urban and rural municipalities, since the change in the costs and benefits may have differed across areas as well.

Tables 8 and 9 present our results broken down by urban and rural municipalities.<sup>10</sup> If we focus just on rural municipalities, the statistical significance of our main findings disappears across specifications (see Table 8), although in magnitude it increases. Now, when focusing on urban municipalities, we can see that our main result persists (see Table 9). However, the magnitude of the coefficients of our two main findings is reduced. In the case of urban municipalities a one unit increase in income inequality translates into an increase of more than four drug-related deaths and more than 3 total homicides for the period 2005 -2010. The fact that the main results are driven by urban municipalities is consistent with the effect of increasing inequality (and the associated increase in the expected benefits of criminal activity) on crime rates being larger in areas where arrest probabilities are lower and where the pecuniary benefits are already at a higher level.

# **7. Concluding Remarks**

The effect of inequality on crime has been empirically addressed by many scholars but with mixed results and mostly for developed economies. This paper attempts to estimate the effect of income inequality on crime in a unique context: Mexico’s Drug War. During this period, drug-trafficking organizations multiplied and expanded geographically across the country, facilitating the incorporation of individuals to criminal activities. We exploit a rich data set containing withincountry variation in inequality and crime rates for the more than 2,000 Mexican municipalities

> 10 Urban municipalities are defined in this paper according to the National Population Council (CONAPO) definition of urban areas. In that sense, a municipality with more than 15,000 inhabitants will be considered urban; and a municipality with less than 15,000 will be considered a urban (or semi-urban) area.

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