A tale of gold and blood: The consequences of market deregulation on local violence

Abstract

We investigate how deregulating and disabling a decentralized structure for monitoring gold transactions in Brazil ultimately led to an increase in violence related to illegal gold mining. We use a Difference-in-Differences design and a unique database that combines the location of gold deposits and protected areas, where mining is forbidden. We demonstrate that municipalities more exposed to illegal gold mining experienced almost ten additional homicides per 100,000 people - roughly 30 % more - after the deregulation. We also find suggestive evidence of more gold-mining land use inside protected areas in exposed municipalities, which serves as an indicator of illegal mining.