When Organized Crime Moves In: Human Capital Disruption and Youth Trajectories  (with Andrea Bocchino)

Ecuador’s transformation into a key cocaine export hub has brought an alarming surge in violent crime to a previously peaceful country. This paper examines whether and how this wave of organized criminal activity disrupts human capital formation. We use a difference-in-differences strategy and proxy exposure to organized crime by proximity to key smuggling hubs—banana plantations and commercial ports. Crime-affected areas experienced an average increase of 18 homicides per 100,000 people and a 2.2 percentage point rise in school dropout rates among students transitioning from primary to lower secondary school (ages 11–14). While upper secondary enrolment remained stable, we observe signs of riskier behaviours: homicide rates among adolescents aged 15–18 increased by 1.8 per 100,000 and the average age of teen mothers declined underscoring the vulnerability of youth outside the education system. The rise in dropout, affecting both boys and girls, is not driven by reductions in educational resources but is linked to household income losses from declines in informal employment. These results provide new evidence on the immediate impacts of organized crime on education in export-oriented trafficking contexts.