Profits and Violence in Illegal Markets: Evidence from Venezuela

• DOI: 10.1177/0022002719898881
• Published date: 01 August 2020
• Author: Dorothy Kronick
• Date: 01 August 2020
• Subject Matter: Articles

Article

Profits and Violence in

Illegal Markets: Evidence

from Venezuela

Dorothy Kronick

1

Abstract

Some theories predict that profits facilitate peace in illegal markets, while others

predict that profits fuel violence. I provide empirical evidence from drug trafficking in

Venezuela. Using original data, I compare lethal violence trends in municipalities near

a major trafficking route to trends elsewhere, both before and after counter-

narcotics policy in neighboring Colombia increased the use of Venezuelan transport

routes. For thirty years prior to this policy change, lethal violence trends were

similar; afterward, outcomes diverged: violence increased more along the trafficking

route than elsewhere. Together with qualitative accounts, these findings illuminate

the conditions under which profits fuel violence in illegal markets.

Keywords

violence, homicide, illegal markets, drug trafficking, Venezuela

Introduction

Life without property rights seldom devolves into war of all against all. In medieval

England, for example, rural landholders often farmed in peace, without centralized

enforcement of land claims (Bates et al. 2002, 601–02). In one swath of Sri Lankan

rice fields in the early 1980s, farmers co-managed an irrigation system with minimal

violent conflict (Ostrom 1990, 170). In colonial South America, smugglers rarely

1

Department of Political Science, University of Pennsylvania, Philadelphia, PA, USA

Corresponding Author:

Dorothy Kronick, Department of Political Science, University of Pennsylvania, 208 S. 37th Street, Room

217, Philadelphia, PA 19104, USA.

Email: dkronick@gmail.com

Journal of Conflict Resolution

2020, Vol. 64(7-8) 1499-1523

ªThe Author(s) 2020

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DOI: 10.1177/0022002719898881

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killed each other, although they could not appeal disputes to the Crown (Grahn

1997).

Even in today’s notoriously violent illegal drug markets—the subject of this arti-

cle—traffickers sometimes find nonviolent ways to do business, notwithstanding the

fact that they cannot take each other to court (e.g., Duran-Martinez 2015b, 1378).

Researchers have studied this variation, asking why violence in illegal markets is

common but inconstant. Part of the answer is well understood. Violence generally

rises with the number of competing traffickers (Castillo and Kronick Forthcoming;

Calder´on et al. 2015, 1472–74) and with unconditional governmentcrackdowns (Les-

sing 2018).

But one key determinant of conflict—the magnitude of the contested profits—is

the subject of debate. Some theories predict that booms in illegal markets facilitate

peace, while others predict that booms fuel violence. There is qualitative evidence

on both sides (e.g., Duran-Martinez 2015a, 123; 2015b, 1393–96). As Lessing

(2018) summarized, on the one hand, “the larger the pie, the more there is to fight

over;” on the other, “lower profits make for more vicious competiti on and less

pacting among [drug] cartels” (p. 23). How violence responds to profits in illegal

markets thus remains an empirical question.

In this article, I find that the growth of illegal drug trafficking increased lethal

violence in Venezuela. Using an original data set construct ed from Ministry of

Health records, I compare lethal violence trends in Venezuelan municipalities near

a major trafficking route, the Panamerican Highway, to trends in other municipa-

lities, both before and after 1989, when counternarcotics operations in neighboring

Colombia increased the use of Venezuelan transport routes.

I find that, for thirty years prior to 1989, violent death rates and trends were nearly

identical in these two groups of municipalities. After 1989, the trends and rat es

diverged: violence increased more in municipalities along the Panamerican High-

way (N¼80) than elsewhere in the country (N¼251). I estimate the unconditional

difference-in-differences at approximately sixteen violent deaths per 100,000; after

accounting for municipality-specific time trends and other factors, I estimate the

difference-in-differences at seven violent deaths per 100,000—approximately half

of the overall pre-1989 violent death rate.

Together with qualitative accounts, I interpret this result as evidence that the

trafficking boom—rather than some other concurrent event—drove the divergence

in violent death rates. Shifts in the age distribution of victims and placebo tests are

consistent with this interpretation. For example, I find no difference-in-differences

in infant death rates, an outcome unlikely to h ave been affected by trafficking-

related violence but plausibly affected by economic conditions that, had they chan-

ged differentially across groups, might account for the divergence in violent death

rates. Moreover, as I discuss below, trafficking along the Panamericana predated

1989; what changed was not the presence of traffickers but rather their profits.

While traffickingprofits are unobservable, I draw on newspaper articles, Venezue-

lan sociological literature, and interviews with government officials to describe two

1500 Journal of Conflict Resolution 64(7-8)