Policy Shocks and Illegal Markets: The Case of Oil Theft in Mexico

• In Event: Trends in Organized Crime

Abstract

Government policies can create economic shocks with unintended consequences for illicit markets. This study examines how Mexico’s War on Drugs increased oil theft (”huachicoleo”) by pressuring cartels to diversify income streams. Prior studies using regression discontinuity designs likely underestimated the policy’s impact due to limited samples and selection bias. Using a Bayesian structural time-series model, this study reveals a three-year lag before significant effects emerged, with oil theft increasing by at least 20% between 2007 and 2012, or 2–3 additional pipeline tappings per month. These findings underscore how anti-crime policies can inadvertently expand illicit markets, highlighting the need for strategies that address adaptive criminal behaviors.

Author

• Ivan Flores Martinez, University of North Carolina at Charlotte