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Erschienen in: The Annals of Regional Science 2/2016

25.01.2016 | Original Paper

Violence in Mexico and its effects on labor productivity

verfasst von: René Cabral, André Varella Mollick, Eduardo Saucedo

Erschienen in: The Annals of Regional Science | Ausgabe 2/2016

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Abstract

This paper examines the evolution of Mexico’s labor productivity (GDP per worker) across its 32 sub-national entities from 2003 to 2013, during a period of rising drug-related crimes. Using quarterly data and economic controls, fixed effects models suggest the effects of crime are small and differ depending on whether such crimes are prosecuted by state/local or federal authorities. However, results from System Generalized Methods of Moments regressions generate stronger responses for (endogenous) wages and labor productivity. First, crime has negative effects on Mexican labor productivity across states during the “war on drugs” period. Second, increases in expenditures on public security lead to falling labor productivity, which can be interpreted as indirect effects of crime. Third, federal authorities are found to be more effective (in not causing lower productivity) than state/local authorities.

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Fußnoten
1
Rodriguez-Oreggia and Flores (2012) pay particular attention to the fact that, after the federal government declared “war on drug cartels,” Mexican states were offered federal forces to combat cartels. Some states accepted these federal interventions in 2007, some did in 2008, and several remained without intervention.
 
2
Abel et al. (2013) discuss the theory of labor productivity versus TFP, as well as evidence for the US under assumptions of constant returns to scale. For Mexican manufacturing, Mollick and Cabral (2009) find that productivity has a positive effect on employment for 25 manufacturing industries from 1984 to 2000.
 
3
Castellanos et al. (2004) argue that data from the IMSS records offer several advantages over existing surveys (ENEU) for Mexico. For example, with IMSS records it is known with certainty whether a worker remains employed with the same firm over time. Also, the definition of the base salary is a comprehensive measure of wages and benefits and is consistently measured over time. Finally, given that these wages are those on which employers pay payroll taxes, they are less subject to being measured with error.
 
4
During Calderón’s administration, the President’s Office published a report with official figures on the number of homicides related to drug trafficking. The use of this database is avoided because some researchers are skeptical about the accuracy of these figures (see, for instance, Correa-Cabrera 2013) and, in addition, it has not been updated since December 2010.
 
5
Using the 4 or 5 categories depicted in Tables 1 and 2, the aggregates of crime move as follows across periods. For the variables from the federal jurisdiction database, the share of crimes closely related to drug crimes moves from 64.3 to 64.6 %. For the variables from the state/local jurisdiction database, the share of crimes closely related to drug crimes moves from 60.4 to 63.0 %. Individual figures show, of course, much more visible movements across periods, as will be discussed below.
 
6
Observations for 2011–2013 are available on INEGI’s Web site, but they are calculated based on forecast estimations of the total population for each state in the country. They use forecast estimations because the last population census in the country was performed in 2010.
 
7
This map is just illustrative. States with the same colors do not have the same number of crimes. Given the number of entities in the country, it is not possible to assign one color to each place. Instead, the number of crimes is divided into four brackets to identify the states with low (lighter color) and high (darker color) values of drug-related crimes.
 
8
In addition, Engelhardt et al. (2008) show that small wage subsidies reduce unemployment and crime rates of employed and unemployed workers, while hiring subsidies reduce unemployment but can raise the crime rate of employed workers.
 
9
Expenditure on public security has negative effects on crime under SGMM estimations of Brazilian states by Sachsida et al. (2010).
 
10
Miller and Upadhyay (2000) estimate the effects of a vector of X on Total Factor Productivity of countries in the world under panel fixed effects. Terms of trade (export and import prices), in particular, have a positive effect on productivity, but only at the 20 % level.
 
11
For example, for the USA at the macrolevel the productivity boom in the late 1990s covered by Anderson and Kliesen (2006) can be mentioned, or the skill bias in the labor market cited by Anderson (2007), and the measurement issues regarding the price deflator raised by Feldstein (2008).
 
12
To some extent, these results are also consistent with the empirical findings by Gurgul et al. (2012), who observe no positive significant effect of defense expenditure on economic growth.
 
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Metadaten
Titel
Violence in Mexico and its effects on labor productivity
verfasst von
René Cabral
André Varella Mollick
Eduardo Saucedo
Publikationsdatum
25.01.2016
Verlag
Springer Berlin Heidelberg
Erschienen in
The Annals of Regional Science / Ausgabe 2/2016
Print ISSN: 0570-1864
Elektronische ISSN: 1432-0592
DOI
https://doi.org/10.1007/s00168-016-0741-1

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