In Mexico, conflicts between drug-trafficking organisations result in a high
number of deaths and immense suffering among both victims and non-victims every year.
Little scientific research exists which identifies and quantifies the monetary and nonmonetary
consequences of ongoing violent conflicts on individuals. Using the Mexican
Family Life Survey for 2002 and 2005, the causal effect of mental health (symptoms of
depression / anxiety) on the extensive and intensive margin of labour supply for workingaged
men and women is estimated. Measures of the ongoing drug-related violent conflicts
both at the macro level using intentional homicide rates by region, and at the micro level
indicated by the presence of armed groups in the neighbourhood, serve as instruments for
mental health. The results show a significant adverse impact of the conflicts on anxiety for
men and women. Based on IV-Tobit model results, a worse mental health state decreases
individual labour supply strongly and significantly for men. The findings demonstrate that
Mexico's population not only suffers from the violent conflicts between drug-trafficking
organisations by anxiety or even depression but also indirectly from less household
income through less work which in turn has consequences for Mexico's social
development and economic growth.