Hidden Drivers of Violence Diffusion: Evidence from Illegal Oil Siphoning in Mexico

Abstract

This paper develops a model of spatial violence diffusion when criminal organizations specialized in one illegal activity (e.g., drug trafficking) are attacked by security forces and tests its theoretical implications using the wave of violence triggered by the Mexican War on Drugs. The model predicts that violence will spread to locations with strategic value for other illegal activities (e.g., oil siphoning). We find evidence supporting this prediction. We document that the Mexican War on Drugs induced drug trafficking organizations to begin stealing oil from the Mexican oil pipeline network and this portfolio reallocation of illegal activities affected the spatial diffusion of violence. We show that violence escalated in locations in the oil pipeline network with no strategic value for drug trafficking. Furthermore, we find that violence escalated more in isolated branches of the oil pipeline network, which are more complicated to protect by the authorities, rendering them susceptible to the establishment of criminal monopolies.