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An Economic Analysis Of A Drug-Selling Gang'S Finances

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Steven D. Levitt
Sudhir Alladi Venkatesh

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Abstract

We use a unique data set detailing the financial activities of a drug-selling street gang to analyze gang economics. On average, earnings in the gang are somewhat above the legitimate labor market alternative. The enormous risks of drug selling, however, more than offset this small wage premium. Compensation within the gang is highly skewed, and the prospect of future riches, not current wages, is the primary economic motivation. The gang engages in repeated gang wars and sometimes prices below marginal cost. Our results suggest that economic factors alone are unlikely to adequately explain individual participation in the gang or gang behavior. © 2000 the President and Fellows of Harvard College and the Massachusetts Institute of Technology

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Article provided by MIT Press in its journal The Quarterly Journal of Economics.

Volume (Year): 115 (2000)
Issue (Month): 3 (August)
Pages: 755-789
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Handle: RePEc:tpr:qjecon:v:115:y:2000:i:3:p:755-789

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  3. Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Blackwell Publishing, vol. 62(4), pages 515-39, October. [Downloadable!] (restricted)
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  5. Grogger, Jeffrey, 1991. "Certainty vs. Severity of Punishment," Economic Inquiry, Oxford University Press, vol. 29(2), pages 297-309, April.
  6. Lott, John R, Jr, 1992. "An Attempt at Measuring the Total Monetary Penalty from Drug Convictions: The Importance of an Individual's Reputation," Journal of Legal Studies, University of Chicago Press, vol. 21(1), pages 159-87, January.
  7. Glenn Ellison, 1994. "Theories of Cartel Stability and the Joint Executive Committee," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 37-57, Spring. [Downloadable!] (restricted)
  8. Richard B. Freeman, 1991. "Crime and the Employment of Disadvantaged Youths," NBER Working Papers 3875, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Nagin, Daniel & Waldfogel, Joel, 1995. "The effects of criminality and conviction on the labor market status of young British offenders," International Review of Law and Economics, Elsevier, vol. 15(1), pages 109-126, January. [Downloadable!] (restricted)
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