Scarcity Without Leviathan: The Violent Effects of Cocaine Supply Shortages in the Mexican Drug War | 2014

 Joint with Daniel Mejia and Juan Camilo Castillo

  R&R Review of Economics and Statistics

This paper explores if scarcity increases violence in markets without a centralized authority. We construct a model in which temporal supply shortages increase contested revenues and induce more violence. To test our model we examine the cocaine trade in Mexico. Scarcity created by cocaine seizures in Colombia – Mexico’s main supplier – increases violence in Mexico, especially in municipalities near the U.S. border, in municipalities with multiple cartels, and where crackdowns on the cocaine trade are more frequent. We conclude that between 2006 and 2009, a sharp decline in the cocaine supply from Colombian could account for 10%-14% of the increase in violence in Mexico and 25% of the differential increase in Mexico’s North.