# **1. Introduction**

There is a growing interest in the economic literature on the pervasive effects of exposure to violence and the presence of armed conflicts on human capital accumulation. Social scientists have suggested that hostile environments may have a detrimental effect on education by reducing enrollment, years of schooling, academic achievement, and even long-term labor market performance. However, the literature has come short on disentangling the direct effect of individuals’ schooling decisions from the indirect effects related to the destruction of infrastructure which inevitably accompanies armed conflict.

In this paper we study the sharp increase in violence experienced in Mexico after 2006 and its effects on human capital accumulation. This upsurge in violence is associated with the Federal Government’s launch of a military offensive against drug trafficking organizations (DTOs) known as the “War on Drugs”. Months after the start of this operation in December 2006, that deployed 6,500 federal troops and continued to expand to approximately 45,000 troops by 2011, violent confrontations between DTOs and official armed forces and between competing DTOs became more frequent and homicide rates increased quickly.

This raise in violence affected significantly some municipalities, while it virtually left others untouched. Though concentrated in some municipalities (that became fighting grounds between DTOs), the municipalities affected in this period are spread across the country. The northern border, and the Pacific and Gulf of Mexico coasts, all saw violence spikes in some of their cities. The increase in violence affected both places that had historically observed high levels (such as Ciudad Juárez in the north) and places that had not experienced high levels before (including the prosperous city of Monterrey). Other cities, including Mexico City, that had suffered significant crime rates in earlier years, did not experience increases during this period.

The fact that the marked increases in violence were concentrated in some municipalities (and not in others) allows us to implement a fixed effects methodology to study the effects of violence. Also, the fact that Mexico’s War on Drugs has not had the destruction of infrastructure which usually accompanies large scale armed conflicts allows us to disentangle the direct effect of violence on individuals’ schooling decisions. Our empirical strategy then consists of comparing changes in educational outcomes with changes in the number of homicides at the municipality level. We find evidence that changes in the level of homicide rates do not seem to be explained by prior trends in homicide rates, economic growth, or other variables, which gives credence to our empirical strategy.

The analysis combines homicides data from official statistics reported by Mexico’s Technical Secretariat of the National Public Security Council (SNSP) with the official education enrollment data from the National Institute of Statistics, INEGI (as reported the Ministry of Public Education, SEP).

We show that increases in violence had a very small impact on the number of students enrolled in a municipality. An increase of 8 homicides per 100,000 individuals (which corresponds to the nationwide increase in the homicide rate during the period of analysis, 2007 to 2011) is associated with no decrease in the number of enrolled students in basic education comprised by primary and lower 2