As part of Columbia University's Spring 2026 Development Workshop, Chris Blattman will present "How Organized Crime is Organized: Lessons from Medellín's Pax Criminalis" at that Development Seminar.
Abstract:
Organized crime represents a large share of economic activity and employment in many cities, but we know a little about its industrial organization and political economy. We begin by establishing three stylized facts. First, diseconomies of scale keep most criminal gangs small. Second, to capture the gains from collusion and mitigate violent conflict, they commonly form local confederations. Third, these confederations often attempt to form city-wide cartels. Why have some succeeded while others fail? We study Medellín, Colombia, whose criminal groups have produced one of the most successful and sustained systems of peace and collusion in the world. Drawing on interviews with nearly 200 criminal group leaders and middle-managers, we document the rules, organizations, and state policies that made this system and peace possible. We then build a model of criminal institution-building. The fundamental problem of collusion and cartel-building in legal industries is imperfect information. In criminal markets, however, we argue that defection is observable, and the fundamental problem is collective action: punishment of defectors is itself costly and creates a free-rider problem. Criminal coalitions overcome it by building institutions that lower enforcement costs, sanction refusal to punish, and shrink the gains from defection. Both the theory and evidence points to two potential sources of variation across cities: the stock of inherited institutional capital, and the incentives of the state to punish violence tolerate criminal collusion.
