Reflections on Drug-cartel Fighting: The Case of Mexico

Some countries, including Mexico, are drug producers and exporters, although their domestic consumption is relatively low. They count with very few tools and resources to reduce drug demand (this, due to an exogenous variable), but they face a high social cost which is mainly caused by the activities of criminal groups. The main purpose of this paper is to analyze these groups using economic theory, and comes to it showing two things: a) production and drug traffic induce criminality, and the delinquents have a high probability of becoming hitmen, and b) public spending to fight drug cartels can cause criminals to violate agreements among them, leading to an increase in violence. Evidence for Mexico is presented.