This is a Job Market Seminar.
This paper studies the effects of violent crime on household expenditures and intrahousehold bargaining power by exploiting the unexpected and geographically heterogeneous rise in drug-related violence in Mexico in the late 2000s. I estimate a household demand model using a panel survey of Mexican households. The results show the escalation in violence increased the expenditure share of male private goods, at the expense of food and other household necessities. These findings would typically be interpreted as a deterioration in women’s bargaining power. But changes in local violence may have also affected consumption preferences. To show that the results can be explained by changes in bargaining power, I complement the analysis with three empirical exercises. First, I show the results are heterogeneous in line with changes in women’s outside options. Second, I compute the effect of violence on intra-household resource shares, a proxy for bargaining power, within a structural model that allows for violence to affect both preference and bargaining power parameters. The structural analysis confirms the negative impact on women’s control over the household budget. Finally, an estimation of changes in self-reported decision-making power further confirms the findings.