In the 1980s, El Salvadoran youth in Southern California formed two street gangs that are now well known internationally: MS-13 and 18th Street. By the mid-1990s, these two gangs had moved on from petty crimes and become more serious criminal organisations, and the U.S. authorities cracked down on them. In 1997, the U.S. began deporting migrants with criminal records (including members of MS-13 and 18th Street) back to their countries of origin. El Salvador say an influx of criminal gang members, who quickly gained control of neighbourhoods across the country, but especially in the capital, San Salvador. The government, and the police, lacked the capacity to prevent these gang territories from being established, in part because the country was still recovering from the civil war that ended in 1992.
What was the impact of these gangs on the neighbourhoods that they controlled, and the people living there? That is the research question that this recent working paper by Nikita Melnikov (Princeton University), Carlos Schmidt-Padilla (University of California, Berkeley), and María Micaela Sviatschi (Princeton University) sets out to answer. They use a variety of data sources, including the 1992 and 2007 Censuses and their own field survey, and implement a regression discontinuity design. Essentially, they test whether there are big jumps (up or down) in key variables related to socio-economic development, occurring at the boundary of gang-controlled neighbourhoods.
They find that:
...residents of gang-controlled neighborhoods in San Salvador have worse dwelling conditions, less income, and lower probability of owning durable goods compared to individuals living just 50 meters away but outside of gang territory. They are also less likely to work in large firms. The magnitudes are very large. For instance, we find that residents of gang areas have $350 lower income compared to individuals living in neighboring non-gang locations and have a 12 percentage points lower probability of working in a firm with at least 100 employees.
The gangs had clear negative effects on development (and interestingly, it doesn't matter which of the two gangs - MS-13 or 18th Street - controls the neighbourhood, since the effects are statistically indistinguishable between them. You might wonder if there was something different about the gang-controlled neighbourhoods before the gang leaders returned to El Salvador. Not so:
These differences in living standards did not exist before the arrival of the gangs. In particular, we replicate the regression discontinuity design with data from the 1992 census, showing that, at that time, neighborhoods on either side of the boundary of gang territory had similar socioeconomic and geographic characteristics. The difference-in-differences analysis confirms this result: after the arrival of the gang members from the United States, areas with gang activity experienced lower growth in nighttime light density compared to places without gang presence, while before the deportations, both types of locations experienced similar rates of growth.
The effect on development is quite large. When Melnikov et al. look at the effect on night-time light intensity (as a measure of development), they conclude that:
The magnitude of the effect is quite large. By 2010, thirteen years after the deportations, areas with high gang presence had experienced nearly 120 percentage points lower growth in nighttime light density than places with low gang presence... in 1998-2010, areas with low gang activity had nearly 120×0.28 = 33.6 percentage points higher growth in GDP than areas with gang presence.
Melnikov et al. undertake a battery of robustness checks on their results (so much so that the working paper is over 90 pages long!). The results are quite robust to changes in the data, and the regression discontinuity results are backed up by the night-time light analysis, which uses a different method (difference-in-differences).
So, what is it that the gangs are doing that impedes development? Melnikov et al. investigate that as well, and note that:
A key mechanism through which gangs affect socioeconomic development in the neighborhoods they control is related to restrictions on individuals’ mobility. In order to maintain control over their territory and prevent the police and members of rival gangs from entering it, both MS-13 and 18th Street have instituted a system of checkpoints, not allowing individuals to freely enter or leave their neighborhoods... Our analysis suggests that, as a result of these restrictions, residents of gang-controlled areas often cannot work outside of gang territory, being forced to accept low-paying jobs in small firms in the neighborhoods where they live.
Restricting freedom of movement, and therefore the freedom of people living in the gang territory to take up higher paying job opportunities outside of the territory, seems to be driving the results. We already know that freer movement of people could substantially increase development globally (see this post, for example). This is an example operating at the micro-level.
[HT: Marginal Revolution, last year]
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