Local Security Spending and the Presence of Criminal Groups in Mexico

What is the effect of local security spending on the presence of criminal organizations and violence in Mexico? I exploit the implementation of the Subsidio para el Fortalecimiento del desempeño en materia de Seguridad Pública, better known as FORTASEG as a natural experiment to estimate the effects of public security expenditures and the number of criminal organizations present in Mexican municipalities. I estimate difference-in-differences models using a 1990-2020 panel dataset of 1476 Mexican municipalities. The analysis shows that cities funded by FORTASEG and municipalities in the control group followed similar trends in criminal presence and violence prior to the program. However, since the implementation of FORTASEG in 2016 the number of criminal groups increased while homicides rates declined in awarded municipalities from 2016 to 2020.