IF YOU COME AT THE KING, YOU BEST NOT MISS: AN ANALYSIS OF THE CROSS-BORDER EFFECTS OF MEXICAN PRESIDENT FELIPE CALDERÓN’S CARTEL KINGPIN STRATEGY

Abstract

This thesis poses the initial question, To what extent did violence in Mexico, fueled by President Felipe Calderón’s kingpin strategy, lead to spillovers in consumption behavior and health outcomes in the US through distortions in the illicit drug markets?, which motivates the sub-questions: 1) What distortionary effects did Mexican violence created by the kingpin strategy have on cocaine and heroin prices and purity? 2) Did these distortionary effects lead to changes in consumption behavior for cocaine and heroin? 3) What were the region-level relationships between Mexican violence, price distortions, and consumption behavior within the US? 4) Were responses in consumption behavior to drug market distortions within the US linked to individual cartel-level activity? Put simply, this paper investigates whether the kingpin strategy’s distortions on the cocaine and heroin markets affected consumption behavior and whether heterogeneities in the effects reveal the power and spatial dynamics of the drug trade. The drug trade is modeled as consisting of the supply-side markets and the demand-side markets using three separate 2SLS models at a national, regional, and cartel level. The main findings of this paper are, first, that the kingpin strategy resulted in positive price pressure in the cocaine and heroin markets, though effects on price varied by region and cartel. Second, the results show that price distortions in the drug markets created a diversion effect, which affected consumption behavior and created significant spillover effects in the US. Additionally, region and cartel-level heterogeneities in the effects reveal the regional spillover effects of violence in Mexico on the US, regional consumption patterns within the US, and provide a visualization of the cartels’ trafficking networks.