Essays on Political Economy of Development in Latin America

Abstract

This dissertation is composed of three applied economics essays in the intersection of development economics and political economy. The first provides an economic explanation to the increase in the intensity of conflict. The second focuses on the effects of presence of illegal activities on educational outcomes. The third analyzes the effect of mass migration on voting behavior and political preferences. Chapter 1 studies how crime may be an unintended consequence of local development. The surge in global demand for Mexican avocados, particularly from the United States, has led to increased production and revenue in avocado-producing municipalities of Mexico. I show that these external changes in avocado global consumption patterns have influenced conflict levels in Mexico. Combining geographical variations in avocado cultivation suitability and fluctuations in avocado demand over time, I find a notable rise in homicides among agricultural workers in municipalities that are well-suited for avocado production. I demonstrate that this rise in homicides is not explained by the increased presence of drug cartels but rather heightened competition between cartels for resources in municipalities where avocados are produced. These findings suggest that cartels vie for territorial control, diversifying their income sources, including the avocado industry, in response to their relatively limited influence over drug markets and routes. In Chapter 2, I turn my attention to the production of illegal crops and how it affects schooling decisions. I focus on the case of Colombian coca leaves, the main input to produce cocaine. The country's main strategy to eradicate coca crops was the fumigation of herbicide until 2015, when the practice was banned. I exploit a plausible exogenous variation in the probability of being sprayed and the temporal effects of the fumigation campaigns as an instrument for the presence of coca fields. This temporal variation along with the cross-sectional variation of the spraying campaigns lead to an instrumental variable difference-in-differences. I use data on coca presence, eradication missions, and school outcomes at the municipal level from 2012 to 2018 to test whether a change in the presence of coca crops has an effect on schooling decisions. I show that my setting does not meet all the assumptions of the traditional difference-in-differences strategy but it fits those of Fuzzy Difference-in-Differences. My empirical findings suggest that an increase in the area cultivated with coca crops increases the high-school dropout rate and it has no effect on the enrollment rate. I rule out the possibility that coca presence crowds out other legal crops. Taken together, these results suggest that high school-age individuals are leaving school to work on coca related activities. In Chapter 3, I revisit the question on whether political preferences of voters are molded by the presence of migrants. I exploit the unanticipated inflow to Colombia of Venezuelans fleeing their home country's political crisis in 2016 and the onset of economic collapse. I compare the results of the 2018 presidential campaign in Colombia across municipalities with similar trends in electoral outcomes between 2002 and 2014 but different presence of Venezuelan migrants on the verge of the 2018 campaign. To address the spatial sorting of migrants across these municipalities, I construct an instrumental variable based on the distance from the closest ports of entry. I find that an increase in the presence of migrants in the municipality yielded a polarized voting behavior. I show that these effects are explained by an increase in the electoral turnout, and that the fondness of voters for Colombia's 2016 Peace Agreement Plebiscite was an important determinant of their behavior, which has been overlooked in past empirical work.