From drug trafficking to state capture : the dynamics of criminal governance, political violence, and crime diversification

This article develops and tests a theory of criminal governance, examining how drug trafficking organizations (DTOs) use bribery and violence to dominate resource-rich regions and counter state interventions. The study draws on data on over 500 political assassinations and 156 lethal attacks on politicians' relatives in Mexico since 2000. Using an instrumental variable approach, the causal effects of government actions on criminal strategies are identified. The findings reveal that DTOs use rent-seeking violence to influence the pool of political candidates in high-value areas. These are primarily oil pipelines, which are central to large-scale oil theft. Government crackdowns intensify political violence against incumbent mayors while paradoxically increasing voter turnout and the probability of the incumbent party's re-election, reflecting public approval of anti-crime measures. Supporting the crime diversification hypothesis, DTOs adapt by expanding into high-profit crimes such as extortion and retail drug distribution. These shifts are geographically strategic, with oil pipelines becoming centres of criminal innovation. Meanwhile, crimes like car theft are suppressed in fuel-theft zones, which helps preserve gasoline demand. Instead, these crimes are displaced to international borders and selected urban centres. The findings reveal the full cycle of criminal governance, illustrating how organized crime reshapes governance, drives violence-including disappearances-and leaves civilians struggling with rising crime and co-opted governments.