Drug trafficking organizations and local economic activity in Mexico

Abstract

Little is known about the relationship between illegal firms and local economic activity. In this paper I study changes in satellite night lights across Mexican municipalities after the arrival of large drug trafficking organizations in the period 2000-2010. After accounting for state trends and differences in political regimes, results indicate no significant change in night lights after the arrival of these illegal firms. Estimated coefficients are precise, robust, and similar across different drug trafficking organizations.