NOVAFRICA News: New Paper Published in Econometrica

“Gangs, Labor Mobility, and Development”

By NOVAFRICA affiliate and Nova School of Business and Economics professor Nikita Melnikov, together with Carlos Schmidt-Padilla and María Micaela Sviatschi.

The study explores how criminal organizations affect economic development by analyzing a natural experiment in El Salvador. Using a spatial regression discontinuity design, the authors show that:

🔹 Individuals in gang-controlled neighborhoods experience lower material well-being, income, and education compared to those just outside gang territory.
🔹 Gangs limit labor mobility by preventing individuals from commuting to other parts of the city.
🔹 These effects are not explained by selective migration, differential violence exposure, or differences in public goods.

Key takeaway: Gangs significantly hinder labor mobility and economic opportunities, with lasting consequences for development.

Access the paper here