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Illegal Drugs and Public Corruption: Crack Based Evidence from California

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Listed:
  • Flamini, A.
  • Jahanshahi, B.
  • Mohaddes, K.

Abstract

Do illegal drugs foster public corruption? To estimate the causal effect of drugs on public corruption in California, we adopt the synthetic control method and exploit the fact that crack cocaine markets emerged asynchronously across the United States. We focus on California because crack arrived here in 1981, before reaching any other state. Our results show that public corruption more than tripled in California in the first three years following the arrival of crack cocaine. We argue that this resulted from the particular characteristics of illegal drugs: a large trade-off between profits and law enforcement, due to a cheap technology and rigid demand. Such a trade-off fosters a convergence of interests between criminals and corrupted public officials resulting in a positive causal impact of illegal drugs on corruption.

Suggested Citation

  • Flamini, A. & Jahanshahi, B. & Mohaddes, K., 2018. "Illegal Drugs and Public Corruption: Crack Based Evidence from California," Cambridge Working Papers in Economics 1847, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:1847
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    Cited by:

    1. Caglayan, Mustafa & Flamini, Alessandro & Jahanshahi, Babak, 2021. "Hindering human capital accumulation: A hidden cost of the silent mafia?," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 828-845.

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    More about this item

    Keywords

    Public corruption; crack cocaine; synthetic control; illegal drugs; and law enforcement;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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