The effect of violent crime on the human capital accumulation of young adults

This paper estimates the effect of an unprecedented increase of drug-related violence in Mexico on the educational outcomes and employment behavior of young adults. The panel nature and the timing of the Mexican Family Life Survey allows for unique gains in this literature, as we can compare pre- and post-violence outcomes of the same individual, and control for migratory response. The results suggest that young adults exposed to increased local violence attained significantly less years of education, were less likely to complete compulsory schooling, and were more likely to be employed. This change in behavior is driven by household financial hardship rather than fear, as it is unrelated to the parents’ perceptions of potential victimization and is strongest for those with parents that are self-employed, the employment group most adversely economically impacted by the Mexican War on Drugs.