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Assessing the crack hypothesis using data from a crime wave: the case of São Paulo


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  • João M P De Mello

    (Department of Economics PUC-Rio)


Mimicking the “Great American Crime Decline” (Zimiring, 2007), violent crime in the state of São Paulo dropped sharply in the 2000s after rising steadily throughout the 1980s and 1990s. This paper evaluates the role of crack cocaine in explaining the aggregate dynamics in violence. Four facts are established. First, the aggregate data show a tight co-movement between the prevalence of crack cocaine and homicides. Second, using city-level apprehension and possession data, I find a strong elasticity of violent crime with respect to crack cocaine after controlling for year, city effects, and many time-varying covariates. I use the estimated elasticity to compute the contribution of crack cocaine to aggregate violence. Crack explains 30% of time series variation in the data. Third, only drug traffic – not drug possession – has an impact on homicides. Finally, I find no impact on property crimes, I find a weaker impact on attempted murder, and, interestingly, I find a weak negative impact on aggravated assault. The theory suggests that both facts – only trafficking matters and crack affects only homicides, not property crime – can be rationalized only if drug-induced crime is driven by systemic violence induced by illegality itself. These results are important for policy because they suggest that violence will not follow legalization of both the possession and the trade of cocaine or crack-cocaine.

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Bibliographic Info

Paper provided by Department of Economics PUC-Rio (Brazil) in its series Textos para discussão with number 586.

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Length: 29p
Date of creation: Dec 2010
Date of revision:
Handle: RePEc:rio:texdis:586

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Keywords: Crack Epidemic; Violence; Panel Data;

This paper has been announced in the following NEP Reports:


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  1. Christopher Carpenter, 2007. "Heavy Alcohol Use and Crime: Evidence from Underage Drunk-Driving Laws," Journal of Law and Economics, University of Chicago Press, vol. 50, pages 539-557.
  2. João M. P. de Mello & Alexandre Schneider, 2010. "Assessing São Paulo's Large Drop in Homicides: The Role of Demography and Policy Interventions," NBER Chapters, in: The Economics of Crime: Lessons for and from Latin America, pages 207-235 National Bureau of Economic Research, Inc.
  3. Saffer, Henry & Chaloupka, Frank, 1999. "The Demand for Illicit Drugs," Economic Inquiry, Western Economic Association International, vol. 37(3), pages 401-11, July.
  4. Ciro Biderman & Jo�oMP DeMello & Alexandre Schneider, 2010. "Dry Laws and Homicides: Evidence from the S�o Paulo Metropolitan Area," Economic Journal, Royal Economic Society, vol. 120(543), pages 157-182, 03.
  5. Gary S. Becker & Kevin M. Murphy, 1986. "A Theory of Rational Addiction," University of Chicago - George G. Stigler Center for Study of Economy and State 41, Chicago - Center for Study of Economy and State.
  6. Jeffrey A. Miron & Jeffrey Zwiebel, 1995. "The Economic Case against Drug Prohibition," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 175-192, Fall.
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