From Drug Lords to Police State: The Effects of Order Transition on Local Economies

Leonardo Gentil-Fernandes, João V. Guedes-Neto, José Incio

Research output: Contribution to journalArticlepeer-review

2 Scopus citations


What is the effect on local economies when the state intervenes to capture its own territories back from non-state actors? In 2008, the government of Rio de Janeiro, Brazil, implemented a policy to take control of favelas that were previously dominated by organized crime groups (OCGs). We use day and night luminosity to assess the effects of this program on economic growth. The difference-in-differences design shows that state intervention has a significant and negative average treatment effect on the favelas that received the intervention. We further test a mechanism to explain this economic downturn: institutional replacement. Based on crime data, we demonstrate that this effect is caused by the destruction of local markets, especially illicit activities. The data highlight the perils of order transition, even when OCGs are removed by state actors. Furthermore, this paper reinforces the need for policies that are mindful of the externalities of institutional shifts.

Original languageEnglish
Pages (from-to)1765-1801
Number of pages37
JournalComparative Political Studies
Issue number10
StatePublished - Sep 2022
Externally publishedYes


  • Latin American politics
  • democratization and regime change
  • organized crime
  • political economy
  • politics of growth/development


Dive into the research topics of 'From Drug Lords to Police State: The Effects of Order Transition on Local Economies'. Together they form a unique fingerprint.

Cite this