Donkey business: Trade, Resource Exploitation, and Crime

This paper examines the relationship between the institutionalization of a renewable resource market with poorly defined property rights and local crime rates. We focus on the regulation of the donkey hide trade in Brazil, driven by foreign demand for eijao, a Traditional Chinese Medicine product. Using a quasi-experimental research design, we leverage the timing of regulatory measures alongside spatial variations in donkey populations across Brazilian municipalities to provide causal evidence that the slaughtering of free-roaming donkeys led to an increase in crime and violence. We further explore the role of market illegality, finding that the impact on crime was twice as large during periods when the trade was illegal in Brazil. Our results carry important policy implications for developing countries grappling with resource booms and weak property rights. These findings emphasize the need for effective regulation, robust monitoring, and enforcement mechanisms to mitigate the social costs associated with natural resource exploitation.