From Maize to Haze: Agricultural Shocks and the Growth of the Mexican Drug Sector

Abstract

Understanding how economic incentives affect illegal drug production is essential for crafting policies in response to the international drug trade. Policymakers typically face a choice between two strategies: targeting criminal groups via law enforcement, and offering producers incentives to engage in alternate activities. Yet, little is known about how the returns to alternate legal activities affect drug supply. We contribute to this literature by examining how shocks to legal commodity prices affect the drug trade in Mexico. Our analysis exploits exogenous movements in the Mexican maize price stemming from weather conditions in US maize‐growing regions, as well as exports of other major maize producers. Using data on over 2200 municipios spanning 1990–2010, we show that lower prices differentially increased the cultivation of both marijuana and opium poppies in municipios more climatically suited to growing maize. We also find impacts on downstream drug‐trade outcomes, including drug cartel operations and killings perpetrated by these groups. Our findings demonstrate that maize price changes contributed to the burgeoning drug trade in Mexico, and point to the violent consequences of an expanding drug sector.

Scarcity Without Leviathan: The Violent Effects of Cocaine Supply Shortages in the Mexican Drug War

“…5 We contribute to this literature by showing that rapacity dominates in the Mexican cocaine trade: higher revenues from cocaine increase violence, especially in areas contested by multiple cartels. This adds to the empirical literature that finds a link between resource booms and violence (Collier and Hoeffler, 2004;Buonanno et al, 2015;Couttenier et al, 2017;Dube and Vargas, 2013) as well as the theoretical literature that emphasizes the role of the number of contenders (Kalyvas, 2006).…”

Narco-Messages: Competition and Public Communication by Criminal Groups

“…Beyond a local market regarding consumption, certain areas are better than others for production. A territory with homegrown drugs, such as marijuana and opium poppies, is of special value to criminal organizations (Dube et al 2016). Mexico has always been a leading supplier of marijuana, but started to gain importance due to its supply of heroin in recent decades (USDS 2011).…”

“…For this variable, we use the Cosia and Rios (2012) data, which employs a text-analysis algorithm to extract web content about recorded criminal activities (Coscia and Rios 2012). This data set has been widely used (Osorio 2015, Gonzalez 2015, Dube et al 2016. For the hypothesis about government enforcement, we use data from Osorio (2015) on violent confrontations by authorities to create the variable Government enforcement.…”

Economic and Non-Economic Factors in Violence: Evidence from Organized Crime, Suicides and Climate in Mexico

“…Several factors have been o↵ered as causes of this escalation: (1) Felipe Calderón's strategy against organized crime, i.e. direct crackdowns and captures of DTO leaders (Guerrero 2010, Calderón et al 2015, Chaidez 2014, Dell 2015, (2) U.S.-Colombia e↵orts to reduce drug flows between both countries, a supply shock that a↵ects drug markets in Mexico (Castillo et al, 2018), and (3) exogenous movements in the international price of corn, which is the main staple crop in Mexico and whose price a↵ects the opportunity cost of joining the drug industry (Dube et al, 2016).…”