Donkey business: Trade, Resource Exploitation, and Crime

This paper examines how the institutionalization of a renewable-resource market with poorly defined property rights affects local crime rates. We focus on the creation of the donkey hide trade in Brazil, driven by foreign demand for ejiao, a Traditional Chinese Medicine product. Using a quasi-experimental research design, we leverage the timing of regulatory changes alongside spatial variation in donkey populations across Brazilian municipalities to provide causal evidence that the slaughtering of free-roaming donkeys led to an increase in homicide rates. The trade's transition through legal, illegal, and legal regimes in a short window allows us to decompose the violence response into two distinct channels: a property-rights effect operative under the legal regime, and an incremental illegality effect that emerges with prohibition. Both channels are economically and statistically significant, with the property-rights channel accounting for the larger share of the violence response.