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Tráfico de drogas, corrupción e inversión extranjera directa: Teoría y evidencia
[Drug trafficking, corruption and foreign direct investment: Theory and evidence]

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  • Espinosa Ramirez, Rafael
  • Ruiz-Porras, Antonio

Abstract

We develop a microeconomic model to explain why sanction policies used by developed countries have had ambiguous effects to reduce drug trafficking in developing countries. In the model, a country receives FDI depending on its government effort to reduce drug exports. However, local drug producers lobby and offer contributions whose impact depends on the level of government corruption. The government sets the level of enforcement against drug trafficking taking into account the contributions paid and the welfare of the local habitants. Analytically, we use the common agency theory to justify and explain diverse sanction policy outcomes. We also show evidence about the relationships among drug trafficking, corruption and FDI for some Latin-American countries.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 36674.

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Date of creation: 14 Feb 2012
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Handle: RePEc:pra:mprapa:36674

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Keywords: Drug Trafficking; FDI; Corruption; Latin America;

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  1. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-50, September.
  2. Perotti, Roberto & Alesina, Alberto, 1996. "Income Distribution, Political Instability, and Investment," Scholarly Articles 4553018, Harvard University Department of Economics.
  3. Alberto Alesina & Roberto Perotti, 1993. "Income Distribution, Political Instability, and Investment," NBER Working Papers 4486, National Bureau of Economic Research, Inc.
  4. Dixit, Avinash & Grossman, Gene M & Helpman, Elhanan, 1997. "Common Agency and Coordination: General Theory and Application to Government Policy Making," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 752-69, August.
  5. Brander, James A. & Spencer, Barbara J., 1987. "Foreign direct investment with unemployment and endogenous taxes and tariffs," Journal of International Economics, Elsevier, vol. 22(3-4), pages 257-279, May.
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