Falling trade barriers and rising crime? Evidence from Colombia

Abstract

Trade liberalization is central to development strategy in low‐ and middle‐income countries, yet its social costs, particularly for poor rural households, remain poorly understood and rarely offset by policy. Greater openness to trade generates benefits through lower prices, product diversity, and export earnings, but heightened import competition can reduce income and employment in exposed sectors, potentially increasing crime by lowering the opportunity cost of illicit activity. Rising agricultural import competition is particularly concerning given that poverty in the developing world is disproportionately rural and that large shares of the labor force depend on smallholder farming. Here, using panel data from 887 Colombian municipalities and a shift‐share instrumental variables approach, we show that the U.S.‐Colombia Free Trade Agreement of 2012—by intensifying import competition in corn and beans—raised home burglaries and robberies of individuals by 16% and 6%, respectively, while reducing business robberies by 13%. Crime impacts were concentrated in Andean municipalities and non‐coca‐producing regions, reflecting the vulnerability of smallholder traditional corn producers to a surge of cheap U.S. imports and the limited economic alternatives available in those areas. Unlike prior studies from Mexico and Brazil, we find non‐robust evidence of impacts on homicides—a divergence explained by Colombia's context of de‐escalating armed conflict, which dampened extreme violence while leaving economically motivated property crime fully exposed. These results call for agricultural trade agreements to be explicitly paired with rural safety nets and labor market policies capable of preventing trade‐induced shocks from translating into elevated crime and deepened rural inequality.