Under what conditions do positive price shocks facilitate cycles of crime and violence? While extant literature posits that positive shocks in licit industries will decrease crime and violence, evidence for this outcome is often taken from contexts with at least nominal levels of state capacity. I challenge these expectations using evidence from Madagascar, which is characterized by extremely low state capacity, and the rapid increase in vanilla prices following an abrupt shift away from synthetic vanilla by several multinational companies. Using a new dataset detailing regional crime rates, I implement a synthetic control model which shows, contrary to most of the existing literature, that price shocks can produce dramatic increases in crime. To explain this result, I draw on interviews with local vanilla farmers, police, and politicians. This qualitative evidence provides support for the quantitative findings by emphasizing how the deficiencies of state institutions contribute to regional insecurity. The paper has implications for the price shock, vigilante, and state capacity literatures along with unique data and methodological contributions.
