Violence and Growth in the Mexican Drug War ∗ Jesús Gorrín y José Morales-Arilla z Bernardo Ricca § December 30, 2019 Abstract This paper documents how violence resulting from the Mexican Drug War hindered local economic growth by affecting production. Focusing on exports allows us to control for demand factors, and hence measure effects on local supply. We compare exports of the same product to the same country of destination, but produced in municipalities with different exposure to violence after a close electoral outcome. Municipalities exogenously exposed to the Drug War experienced a 45% decrease in 3-year export growth. The effects concentrate on larger exporters, along with exports of more complex, capital-intensive, and skill-intensive products. Keywords: Exports, Violence, Mexico, Regression Discontinuity. JEL Classification: H56, D72, F16, N76 ∗First Draft: November 27, 2017. We are grateful to Ghazala Azmat, Vicente Cuñat, Melissa Dell, Daniel Ferreira, Juanita Gonzalez-Uribe, Ricardo Hausmann, Dirk Jenter, Tom Kirchmaier, Horacio Larreguy, Nathan Nunn, Daniel Paravisini, Cláudia Custódio, Vikrant Vig, seminar participants at LSE Finance, Warwick Macro and International Workshop, the Growth Lab Seminar at Harvard’s CID, the Development Seminar at Harvard Economics, the Political Economy of Development Seminar at Harvard’s Government Department, and the LACEA/LAMES conference for helpful comments. yCorresponding author. Warwick Business School. Address: Office 2.010, Gibbet Hill Road, Coventry, CV4 7AL, UK. Phone: +44 7584 028586. Email:
[email protected]. zHarvard University. Address: Harvard Kennedy School, 79 JFK Street, Cambridge, MA, 02138. Phone: +1 617 6209896. Email:
[email protected]. §Insper. Address: Rua Quatá 300, São Paulo - SP, Brazil, 04546-042.