Gang Crackdowns

Nikita Melnikov, Carlos Schmidt-Padilla and María Micaela Sviatschi

No 35866, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: What are the consequences of restoring state authority in territories governed by criminal organizations? Combining household surveys and administrative records with detailed maps of former gang-controlled areas, we study how El Salvador’s 2022 State of Exception, which ended two decades of gang territorial control, reshaped Salvadoran society. We find that the removal of gang control integrated previously segmented labor markets, improving mobility, employment outcomes, household income, and financial inclusion. Areas with greater pre-2022 gang exposure also experienced larger increases in business formation and property investment. However, the legacy of criminal governance persists through residence-based discrimination: employers remain less willing to hire otherwise identical applicants from former gang-controlled neighborhoods. Finally, although overall support for the crackdowns remains high, individuals who witnessed police abuse report substantially greater distrust of the police and the national government, suggesting that abuses of state authority may undermine the political sustainability of tough-on-crime policies.

JEL-codes: O10 P0 (search for similar items in EconPapers)
Date: 2026-10
Note: DEV POL
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