🌐ENGLISH

Mercatorum University and CRENoS

University of Valencia and GLO

Organized crime kills, but it also pays, creating opposing consequences for local communities. In this paper, we examine the impact of huachicol, the organized theft of fuel from Mexico's pipeline network, on two outcomes that capture these opposing effects: homicides and infant mortality. Using a difference-in-differences design, we exploit variation in pipeline presence and a fuel price shock that sharply increased the profitability of fuel theft. We find that the shock increased homicides but reduced infant mortality. We examine several potential mechanisms and find that improvements in local economic conditions provide the most plausible explanation for the decline in infant mortality. Specifically, we document an increase in nighttime lights, a proxy for economic activity, and a decline in infant hospitalizations for conditions that are particularly sensitive to household resources. Our findings reveal a violence paradox: while more profitable illicit markets increase homicides, they also reduce infant mortality, consistent with greater financial resources available to households due to fuel theft. This helps explain why some communities remain economically dependent on illicit markets despite rising violence.(JEL Classification:K42, O17, I10, I15)