Labor market consequences of homicides: A gender perspective from Mexico

This paper explores how fluctuations in crime rates influence labor market outcomes in Mexico. Using detailed survey data and an individual-fixed effect estimation, the analysis reveals distinct gender dynamics in response to rising homicide rates. Men are more likely to exit the labor market, while women increasingly join the workforce, mainly in the informal sector. This pattern is consistent with an added-worker effect, which we document using household-level evidence. This outcome is largely driven by the presence of drug trafficking organizations, which primarily employ men in their operations. Escalating violence also increases labor mobility, leading to higher job separations, especially among women. Our results highlight that while increasing crime in the form of homicides may not induce large changes in the aggregate level of employment, there is evidence of labor reallocation across and within sectors. This suggests an increase in labor market misallocation.