A Protection Model of Kidnapping: Evidence from Colombia

Abstract: Ransoming hostages is an extremely tricky economic transaction plagued with trust and enforcement problems. Yet, the large majority of kidnaps is peacefully resolved on a commercial basis suggesting that the trade in hostages is “governed”. This paper explores the role of Mafias in governing the hostage trade in Colombia’s great kidnapping boom from 1993-2010. The FARC, ELN and various drug cartels were infamous for kidnapping. But the usual Mafia business model is to extort “protection” money – what explains the abductions? We analyse more than 35,000 kidnappings over 18 years of civil conflict collected at the municipality level. We show that kidnapping is extremely rare in municipalities controlled outright by drug cartels or insurgents. Instead, kidnapping is associated with territorial disputes and sudden surges in investment and economic activity. Mafias only kidnapped when there were multiple competing “protectors” and to extract payments from (foreign) firms unable to buy protection from “terrorists”. Hostage stakeholders paid premium ransoms to insurgents, because they developed reputations for long detentions and smooth commercial resolutions. This created a secondary market for hostages: high profile victims were sold from disputed territories to insurgents. We argue that the FARC and ELN’s predominance in the kidnap statistics arose not because they were kidnappers but because they were ransoming specialists.