The War on Drugs, Military Interventions and Economic Activity in Mexican States from 2004 to 2015
Keywords:War on drugs; cost of conflict; Mexico; economic growth
We analyse the relationship between the military interventions within the so-called war on drugs and the economic activity at the subnational level in Mexico. During the early years of the war on drugs, federal forces were stationed in several Mexican states to ensure their security, known as Joint Interventions (Operativos Conjuntos). We focus on assessing the economic activity's impact on the nine Mexican states treated by the Federal Government's Joint Interventions. The empirical analysis comprises three econometric techniques: (i) a modified version of the interrupted time series approach; (ii) a univariate difference-in-differences method; and (iii) a time–effect panel regression. According to our findings, there is a negative association between Joint Interventions and subnational economic activity. Between 0.80 and 1.66 percentage points, the treated states experienced a considerable decline in the average rate of economic activity growth.