Violence Spikes and Labor Market Inequality: Evidence from Mexico

• In Event: Organizational Mechanisms of Inequality in Work and Entrepreneurship

Abstract

Labor markets in the Global South are frequently disrupted by shocks that interfere with organizational routines and market relationships, often with unequal consequences across workers. Sudden spikes in violent crime represent a particularly acute form of such disruption, with potential implications for employment relationships and labor market inequality. Building on existing economic and sociological theories, this study develops an integrated framework linking crime shocks to employment outcomes through labor supply, labor demand, and job-matching mechanisms, highlighting how such shocks may disproportionately affect workers from lower socioeconomic backgrounds. The framework is examined in the context of a sudden and dramatic escalation in violence following the capture of a major drug cartel leader in the Mexican city of Culiacán in 2024. Synthetic control analyses and difference-in-differences estimation indicate that the crime wave produced a rapid decline in employment relative to other Mexican cities, concentrated among workers with low educational attainment—a common proxy for socioeconomic status in the Mexican context. Mechanism analyses suggest that both labor supply and labor demand responses contributed to employment losses overall, with inequality effects being most clearly evident on the supply-side.

Author

• Santiago Campero, University of Toronto