Market Structure and Extortion: Evidence from 50,000 Extortion Payments
Speaker(s)Micaela Sviatschi (Princeton University, Unites States)
Date and time
October 18, 2021
16:00 - 17:00
gangs compete for extortion? Using detailed data on individual extortion
payments to gangs and sales from a leading wholesale distributor of consumer
goods and pharmaceuticals in El Salvador, we document evidence on the
determinants of extortion payments, firm responses to extortion, and effects on
consumers. We exploit a 2016 non-aggression pact between gangs to examine how
collusion affects extortion in areas where gangs previously competed. While the
non-aggression pact led to a large reduction in violence, we find that it increased
extortion by 15% to 20%. Much of the increase in extortion was passed-through
to retailers and consumers: we find a large increase in prices for
pharmaceutical drugs and a corresponding increase in hospital visits for
chronic illnesses. The results shed light on how extortion rates are set and
point to an unintended consequence of policies that reduce competition between
Micaela Sviatschi is an Assistant Professor of Economics at Princeton University since 2018. She works on labor and development economics, with a particular focus on human capital, gender-violence and crime. Her research has been published in the Economic Journal, Journal of Development Economics, among others.
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