Organised Crime

The literature identifies several root causes for the emergence and persistence of organised crime. Scholars have studied the interactions between state capacity, criminal governance, local socioeconomic conditions, and the expected returns from illicit activities. We distinguish four broad factors: (1) weak state capacity; (2) social identity and community relations; (3) economic incentives and the structure of illicit markets; and (4) inadvertent outcomes of migration, deportations, and incarceration.

Weak State Capacity

State weakness refers to the limited capacity of governments to perform essential functions such as exercising a monopoly on violence, raising revenue, enforcing laws, regulating markets, and providing public goods. Rather than being an absence of governance, weak states often reflect historical underinvestment in legal and fiscal institutions due to political instability, lack of common-interest public goods, or self-interested elites with short time horizons (Besley and Persson 2009, 2010, Acemoglu 2005). These states frequently coexist with high levels of poverty, criminal governance, and clientelistic or patrimonial authority structures (Besley and Persson 2010, Fergusson et al. 2022). As Fearon and Laitin (2003) argue, such institutional fragility makes non-state armed groups more feasible and attractive by weakening local policing and enabling abusive or ineffective state responses, which can push civilians toward rebel or criminal groups. These dynamics are also evident in contexts like Colombia, where the persistence of paramilitary groups has been shaped by political incentives and electoral benefits, undermining state-building efforts (Acemoglu et al. 2013). Thus, this vacuum of formal authority creates space for private or criminal actors to step in – providing security, collecting informal ‘taxes’, and arbitrating disputes (Acemoglu et al. 2020, Alesina et al. 2019).

Many authors connect the Sicilian mafia’s origins to the incomplete establishment of the central government’s monopoly on violence in the late 19th century (Bandiera 2003, Buonanno et al. 2015). In that context, local elites and landowners faced the risk of bandit raids and demanded private protection. Groups that supplied protection developed governance structures that taxed legal activities and enforced local order, thus sowing the seeds of mafia-like organisations (Acemoglu et al. 2020).

In places where official policing is limited, criminal organisations can install themselves as parallel authorities. Blattman et al. (2025) document that in certain neighbourhoods of Medellín, Colombia, gangs manage extortion, mediate disputes, and impose curfews. Over time, these organisations can gain quasi-legitimate authority in the eyes of local residents who see little alternative for security and conflict resolution. Similarly, in Rio de Janeiro’s favelas, Magaloni et al. (2020) identify different forms of gang rule, based on fieldwork and surveys. In particular, they highlight that criminal governance structures emerge in areas where state policing is absent, inconsistent, or abusive, leading residents to rely on gangs for protection and basic governance.

In this sense, it is important to note that the mere presence of the state does not guarantee the elimination of organised crime; rather, it is the presence of a strong and capable state that makes the difference. In some instances, criminal organisations operate in localities with a formal security force. Criminal groups may co-opt officials, forge collusion with politicians, or take advantage of local corruption. Blattman et al. (2025) document how increasing state presence in vulnerable and gang-ridden contexts can sometimes incentivise gangs to provide more governance and keep the state out. Buonanno et al. (2016) emphasise that the state can remain weak in key tasks such as policing or judiciary enforcement even when it is present in other domains. This partial presence fosters the rise of criminal governance in targeted markets and neighbourhoods.

Acemoglu et al. (2020) measure the consequences of weak states in Sicily. Using archival data, they show that areas with historically lower state capacity exhibit higher mafia infiltration today, consistent with the argument that criminals step in when official enforcement is limited. In a contemporary context, Dipoppa (2025) also illustrates how criminal organisations can thrive even in strong states. She argues that mafia groups actively expand into well-governed areas by forging strategic alliances with businesses and politicians. Through the provision of illegal labour services and political brokerage – particularly in migrant labour markets – they establish themselves as parallel authorities. In both accounts, incomplete or weak enforcement enabled local power vacuums that mafia groups exploited.

Social Identity and Neighbourhood-Based Organisation

Some authors suggest that criminal groups rely on social identity for cohesion. The US context provides examples where street gangs tie their membership to neighbourhood identity, ethnicity, or shared experiences of exclusion (Venkatesh and Levitt 2000). Gangs in Nicaragua, El Salvador and Brazil have also been examined through ethnographic methods (Rodgers 2006, Cruz 2010, 2013, Lessing 2021). Scholars argue that in settings where young individuals face limited legitimate opportunities, gangs offer social status, a sense of belonging, and material benefits. These organisations also enforce internal rules that govern members’ conduct and manage disputes (Skarbek 2012, 2024). In El Salvador, there is extensive qualitative evidence that, in its origins, gang identity was deeply embedded through rituals, nicknames, tattoos, and the symbolic renunciation of family ties – mechanisms that helped members internalise loyalty and adopt the gang as a surrogate ‘family’ (Moodie 2010). Cruz (2010) and Cruz (2013) further show that gang membership was often rooted in experiences of social marginalisation and driven by the search for recognition, protection, and solidarity. Similarly, in Brazil, prison gangs such as the Primeiro Comando da Capital (PCC) rely on shared histories, coded language, and ideological messaging to foster internal cohesion and collective action (Lessing 2021). Across these contexts, social identity plays a central role in reducing defection, building trust, and facilitating the organisation of illegal enterprises by aligning individual behaviour with group norms.

At the same time, street-level governance in some cities sometimes emerges from incentives to foster local legitimacy. Gangs might regulate local petty crime, demand ‘taxes’ from neighbours, and punish theft or violence within their territory (Blattman et al. 2025). They may also supply employment or credit-like arrangements for members, which fosters loyalty. Rodgers (2006) shows that Nicaraguan gang leaders see themselves as community protectors who step in when the official police force is perceived as unresponsive. These findings suggest that organised crime can leverage local social bonds, not just fear or intimidation.

In terms of causal evidence, recent studies have begun to explore the role of social cohesion in shaping the emergence and influence of criminal actors. Sviatschi (2022b) shows that communities with stronger pre-existing social bonds prior to the arrival of gang leaders are more effective at mitigating recruitment. Furthermore, Bandiera et al. (2022) finds that these same communities have experienced lower levels of extortion and gang activity in recent years. Complementing this, evidence from Peru shows that individuals who grew up in environments characterised by stronger moral norms and social cohesion are significantly less likely to engage in criminal behaviour, including participation in organised crime (Guerrero-Trinidad 2025). Similarly, Magaloni et al. (2021) show that Indigenous communities in Mexico, governed through traditional “usos y costumbres” institutions, tend to have significantly lower levels of cartel presence and violence compared to similar areas that rely on formal state security. This resilience seems to stem from their participatory democratic practices, community-led security structures, and parallel justice systems, which together strengthen the community’s ability to resist external criminal control.

Economic Incentives

Illicit markets flourish when demand for illegal goods and services is high and profits exceed the expected cost of law enforcement crackdowns. The crime model developed by Becker (1968) provides a foundational conceptual framework for understanding individuals’ decisions to engage in illicit markets. According to this approach, people weigh the potential benefits of committing a crime – considering both expected economic returns and the probability of being detected and punished – against the opportunity costs of forgoing legal market alternatives.

Following this model, an increase in formal employment opportunities should lead to a reduction in crime rates. Recent research provides compelling evidence on the role of labour market conditions in shaping individual involvement in criminal organisations. Carvalho and Soares (2016) analyse how drug trafficking and local unemployment shape the incentives of young people to join gangs in Brazilian favelas. They argue that the opportunity cost of illegal activities is lower when legal labour markets fail to offer stable income. Similarly, Dell et al. (2019) find that job losses in the manufacturing sector – driven by trade competition with China – lowered the opportunity cost of engaging in illicit activities such as drug trafficking,particularly among young men with low levels of education. Dube et al. (2016) also show that fluctuations in commodity prices, such as maize, can influence cartel entry into certain areas, as it becomes more profitable to shift from legal agriculture to illicit crops or from low-wage labour to drug trafficking. Likewise, Khanna et al. (2023) find that higher costs of formal employment in Medellín led to reduced participation in the formal sector and increased recruitment into criminal organisations. Together, these findings reinforce the idea that weak formal labour markets can push individuals – especially youth – toward structured criminal networks.

While improved opportunities in the legal sector can steer individuals away from criminal groups, there is also causal evidence that higher returns in illegal markets can pull individuals into illicit activities. In Peru, Sviatschi (2022a) finds that early exposure to illegal labour markets linked to the cocaine trade leads to diminished accumulation of formal human capital. Combined with the development of crime-specific skills, this exposure significantly increases the likelihood of long-term engagement in organised crime. The impact is particularly severe for children between the ages of 11 and 14, who – driven by high returns in the illegal sector – are more likely to drop out of school and engage in illegal activities, such as coca processing and drug trafficking. The long-term implications are substantial: individuals exposed at a young age are approximately 30% more likely to be incarcerated for violent or drug-related offenses as adults, compared to those not exposed to these environments. The study attributes this outcome to the formation of sector-specific human capital – that is, skills and connections that reduce the barriers to sustained participation in criminal activities.

At the same time, recent research has also shown how expected returns in the illicit sector can affect youth decisions to get involved in gangs. In particular, Blattman et al. (2025) examine how early exposure to gangs and beliefs about gang life in Colombia influence youths’ educational aspirations and interest in criminal activity – demonstrating that information and perception can shift behaviour. Over time, these dynamics could contribute to a criminal pipeline from disadvantaged neighbourhoods into gang structures. This underscores the importance of early interventions in schools during key developmental stages to disrupt the cycle of recruitment. However, as we will discuss in the section on policy responses, there is a notable lack of interventions specifically targeting these critical age groups.

These cases illustrate how economic incentives, labour market constraints, and human capital formation interact to sustain and deepen participation in organised crime over time.

Inadvertent Policy Impacts

Deportations and Migration

Scholars have also examined how US deportation policies – particularly those targeting criminal offenders – impact receiving communities in migrants’ countries of origin (Sviatschi 2022b, Kalsi 2018, Ambrosius and Leblang 2025, Rozo et al. 2021). In the case of El Salvador, mass deportations of gang members from the United States in the 1990’s significantly contributed to the expansion of violent gangs. Sviatschi (2022b) shows that US-based gang networks extended their reach into Central America following large-scale deportations. Deported individuals, often with established ties and organisational knowledge, played a central role in founding and structuring new gang cells. Exploiting variation in the birthplace of gang leaders, the study finds that communities receiving deported gang leaders experienced increases in homicides, extortion, and the presence of individuals with US gang affiliations. Kalsi (2018) and Sviatschi (2022b) also highlight that these dynamics can disrupt children’s educational outcomes and heighten their vulnerability to gang recruitment.

Migration flows themselves can also be exploited by criminal groups as channels for territorial expansion and the transfer of criminal capital. Murphy and Rossi (2020) demonstrate that early 20th-century Chinese migration to Mexico helped introduce poppy cultivation, laying the groundwork for future cartel activity. More recently, the mass migration crisis from Venezuela has provided a new opportunity for organised crime to expand their reach. Initially extracting rents from migrant smugglers, Venezuelan gangs – most notably the prison-based group Tren de Aragua – have evolved into vertically integrated actors that control multiple aspects of the migration corridor. Qualitative evidence suggests that these groups now manage transportation routes, extort migrants, and run temporary lodging operations across countries such as Mexico, Colombia, Ecuador, Peru, and Chile (El País 2023, Insight Crime 2023). Guerrero and Sviatschi (2025) provide causal evidence of this evolution. Leveraging the timing of Peru’s imposition of migration restrictions on Venezuelan nationals, they show that these restrictions facilitated the expansion of Tren de Aragua’s operations beyond Venezuela due to an increased demand for migrant smugglers. Their analysis finds that this expansion led to significant increases in extortion, human trafficking, and sexual exploitation, particularly in areas where migrants concentrated – such as informal settlements, transport hubs, and temporary shelters. Relatedly, Cabra-Ruiz et al. (2024) also provide evidence on how the migration crisis increased violent events related to criminal organisations in Venezuela. A similar situation happened in Colombia, where Venezuelan migration increased homicides near the border, primarily affecting migrants as victims (Knight and Tribin 2023).

These studies highlight how international policy decisions can produce unintended consequences by fuelling the expansion of organised crime in developing regions – particularly where state capacity is weak or unprepared to respond effectively. Moreover, they show how criminal capital – such as networks, knowledge and reputational power – can be transferred across geographic areas. In this context, further evidence is needed to understand whether legal migration pathways can curb the growth of migrant smuggling networks by reducing demand for their services. Moreover, there is no causal evidence on how the expansion of criminal organisations into human trafficking specifically affects women.

Mass Incarceration

Large-scale incarceration policies have produced unintended consequences for the dynamics of organised crime. A growing body of research shows that prisons often serve as incubators where inmates form criminal networks, adopt gang identities, and engage in illicit trades (Lessing 2017a, Skarbek 2012, Tobón 2022, Escobar et al. 2023, Durlauf and Nagin 2011). Upon release, these individuals frequently maintain ties formed behind bars, reinforcing gang structures in their communities – as documented in Colombia by Escobar et al. (2023). Lessing (2017a) argues that harsh crackdowns may even strengthen prison gangs, enabling them to coordinate with external actors, enforce discipline, or escalate violence. Recent evidence from Ecuador further highlights this spillover effect: released offenders significantly increase local crime (Jaramillo 2024). In addition to becoming schools of crime, a recent review highlights how many prisons across Latin America and the Caribbean have effectively become criminal hubs, facilitating criminal activities and strengthening criminal organisations across the region (Schargrodsky and Tobón 2025).

Researchers have also pointed out that incarceration might reinforce gang identity and loyalty. Skarbek (2012, 2024) shows how gangs in US prisons enforce a code of conduct through internal courts or violent punishments. Similar patterns appear in Latin America, where prison gang leaders continue to manage operations outside the prison walls (Lessing and Denyer Willis 2019). Thus, efforts to remove criminals from the streets may inadvertently enable the formation of sophisticated organisational structures in prisons. While most of the research is descriptive, more research is needed to understand the mechanisms for which criminal organisations expand using prisons. In particular, if released offenders may diffuse the influence of prison-based criminal organisations through family and peer networks.

For full reference list see the end of the conclusion chapter.