Territorial Criminal Enterprises: Evidence from Rio de Janeiro

By Joana Monteiro, duardo Fagundes , Mariana Carvalho , Ramon Gomes

Some criminal groups are able to avoid confrontation and diversify their economic activities while others are constantly contested by rival groups and the state. To understand why, we propose a model to investigate criminal groups’ incentives to invest in military capacity and the state’s response to arming. Typically it is difficult to map criminal groups’ presence and document their economic activities. We build a novel panel dataset to map presence and characterize the economic activities of criminal groups in Rio de Janeiro, where drug factions and militia groups have controlled territories for at least three decades. We provide evidence that both groups are multi-product enterprises that explore a wide range of licit and illicit goods and services. We empirically test the predictions of our model. Our findings suggest that more groups in the territory increase conflict and state repression and reduce economic diversification. In addition, we argue that the ability to collaborate with the state is crucial for groups to exploit more markets. To the best of our knowledge, this is the first study that uses systematic data to show how criminal groups in Rio de Janeiro evolve over time and diversify their economic activities. 

Encontro da Sociedade Brasileira de Econometria - Gran Mareiro Hotel | Fortaleza - CE, n: 44º . 2023. 2022. 48p.