Seminar Room 1, Espais de Recerca (ERE)

Duration: 20 minutes

Abstract: Mexican President Felipe Calderón came into office in December of 2006. At the beginning of his administration, the government deployed an aggressive security policy to fight drug trafficking organizations, more commonly known as the Mexican War on Drugs. The policy earned a lot of criticism due to the unintended casualties as consequence of the frontal fight against drug criminals. In this article, we evaluate the economic effects of the War on Drugs policy. To assess the economic effects of this policy, we study the effects of the growth of homicides and the changes of state level military expenditure on economic growth. Using spatial econometrics we find that while the growth of homicides had no significant effect on state GDP growth, the state-approximated military expenditure to fight drug trafficking organizations had a positive and significant effect on the per capita economic growth rate.