Abstract
<p><em>Prior research reports mixed results regarding the economic impacts of crime. This study employs data from all regions of Mexico, including border regions in both the north and the south, to examine the effects of homicides on retail activity across Mexico during a period of escalating violence. The results indicate that one additional homicide within a municipality eliminates one retail establishment and one paid job in the retail sector. Furthermore, the negative consequences of violent crime for retailers are augmented by proximity to an international border. This is consistent with previous research findings that cross-border shopping is a key feature of commerce along the international boundaries of Mexico. It suggests that crime waves may disproportionately impact border city retail activity by partially diverting customer traffic to stores located in neighboring countries. This result is also consistent with the finding of recent research that violent conflict in northern Mexico resulted in increased retail activity in some United States border cities.</em></p>
Highlights
In 2008, Mexico experienced a spike in violent crime, primarily as a consequence of turf wars between competing drug-trafficking organizations (Rios, 2014)
While neighborhood-level effects of violence on retail business activity have been documented in those previous studies, there is little prior evidence on whether violent crime will affect the distribution of retail activity at higher levels of geographic aggregation
The first null hypothesis is that violent crime has no adverse impact on aggregate municipal-level retail activity
Summary
In 2008, Mexico experienced a spike in violent crime, primarily as a consequence of turf wars between competing drug-trafficking organizations (Rios, 2014). The crime wave was characterized by a numerical increase in homicides, and by highly visible displays of violence perpetrated by organized criminal groups. Gun battles in public places became more common along with attacks on law enforcement and execution-style killings (Heinle et al, 2017). Many drug trafficking organizations diversified into other activities, contributing to a greater incidence of robbery and extortion (Robles et al, 2013)
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