Abstract:

This paper documents how violence resulting from the Mexican Drug War hindered local export growth. Focusing on exports allows us to abstract from demand factors and estimate effects on local capacity to supply foreign markets. We compare exports of the same product to the same country, but facing differential exposure to violence after a close electoral outcome. Firms exogenously exposed to the Drug War experienced lower export growth. Violence eroded the local capacity to attract capital investment, disproportionately hampering large exporters and capital-intensive activities.