Globalization and the Price Decline of Illicit Drugs
AbstractRetail prices of major drugs like cocaine and heroin have declined dramatically during the last two decades. This price decline has tended to offset the effects of drug policies aimed at reducing drug use in major industrial countries. The main finding of this paper is that the decline in the retail prices of drugs is related to the strong decline in the intermediation margin (the difference between the retail and producer prices) in the drug business. We develop the hypothesis, and give some evidence, that globalization has been an important factor behind the decline of the intermediation margin. We conclude with some thoughts about the effects of globalization on the effectiveness of drug policies and argue that globalization may have increased the relative effectiveness of policies aiming at reducing the demand of drugs.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1990.
Date of creation: 2007
Date of revision:
Find related papers by JEL classification:
- F10 - International Economics - - Trade - - - General
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
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