capital accumulation in a highly violent setting through mechanisms besides the destruction of infrastructure.

Recent studies have attempted to use Mexico’s War on Drugs to study the effects of violence on economic outcomes. Arias and Esquivel (2013) assess the economic impact of drug-related violence by looking at the relationship between organized crime-related homicides and labor market indicators. They find that drug-related violence increases unemployment (ten additional homicides per 100,000 inhabitants lead to an increase of a half percentage point in the unemployment rate), and that the impact is disproportionally larger for women than for men. Additionally, their evidence suggests that the increase in violence has destroyed both formal and salaried jobs, while increasing selfemployment.

Velásquez (2014) also studies the effect of drug-related homicides on labor market outcomes and household expenditures in Mexico. Taking into consideration endogenous migration, this study finds heterogeneous labor market effects by gender and occupation. In particular, she presents evidence that increases in the homicide rates increases the probability that self-employed women leave the labor market and reduce their hours worked. By contrast, this study finds that violence does not appear to affect the labor market participation of self-employed men, but does negatively affect their hourly and total earnings. Finally, the paper also concludes that these negative labor outcomes caused by violence had a negative impact in per capita expenditure at the household level.

Another study that uses the same data set, by Dell (2014), shows that homicide rates and diversion of drug traffic had negative impacts on informal sector earnings and female labor force participation, but it finds no significant effect on formal sector wages and male labor force participation (in the same line as Velásquez). The study concludes that while economic effects may be noisily estimated, they are consistent with qualitative evidence that DTOs extort informal sector producers via protection rackets.

Robles et al (2013) study the effect of drug-trafficking related homicides in Mexico on economic activity (measured using electricity consumption) and unemployment. They suggest that drug-related crime may be affecting the economy by increasing extortion, inducing migration of businesses and business owners to safer territories, a decrease in capital investment and creation of new businesses. They find that an increase of 10 homicides per 100,000 inhabitants generates a decrease in the proportion of people working of 2-3 percentage points. Additionally an increase of 1 homicide per 100,000 inhabitants decreases municipal income by 1.2%.

Finally, Enamorado, et al (2014) combine municipality-level data on incomes (from poverty maps) and crime data for Mexico, and study the effects of the spike in violent crime on income convergence. They find evidence indicating a negative impact of drug-related homicides on income growth in Mexican municipalities over the period from 2005 to 2010. Non-drug related crimes, on the other hand, are not found to have any effect on the economic growth rate of municipalities during the same time period.

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