Gangs, Labor Mobility and Development

123 Pages Posted: 21 Sep 2020 Last revised: 20 Jul 2023

See all articles by Nikita Melnikov

Nikita Melnikov

Nova School of Business and Economics

Carlos Schmidt-Padilla

University of California, Berkeley

Maria Micaela Sviatschi

Princeton University

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Date Written: September 2020

Abstract

We study how territorial control by criminal organizations affects economic development. We exploit a natural experiment in El Salvador, where the emergence of these criminal organizations was the consequence of an exogenous shift in American immigration policy that led to the deportation of gang leaders from the United States to El Salvador. Upon arrival, the gangs gained control over many urban areas and re-created a system of borders to protect their territory from outsiders. Using a spatial regression discontinuity design, we find that individuals in gang-controlled neighborhoods have less material well-being, income, and education than individuals living only 50 meters away but outside of gang territory. None of these discontinuities existed before the arrival of the gangs. A key mechanism behind the results is that gangs restrict individuals’ mobility, affecting their labor market options by preventing them from commuting to other parts of the city. The results are not determined by high rates of selective migration, differential exposure to extortion and violence, or differences in public goods provision.

Suggested Citation

Melnikov, Nikita and Schmidt-Padilla, Carlos and Sviatschi, Maria Micaela, Gangs, Labor Mobility and Development (September 2020). NBER Working Paper No. w27832, Available at SSRN: https://ssrn.com/abstract=3696200

Nikita Melnikov (Contact Author)

Nova School of Business and Economics ( email )

Campus de Carcavelos
Rua da Holanda, 1
Carcavelos, 2775-405
Portugal

HOME PAGE: http:// https://www.n-melnikov.com/

Carlos Schmidt-Padilla

University of California, Berkeley

210 Barrows Hall
Berkeley, CA 94720
United States

Maria Micaela Sviatschi

Princeton University ( email )

22 Chambers Street
Princeton, NJ 08544-0708
United States

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