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The use of violence ini llegal markets: evidence from mahogany trade in the Brazilian Amazon

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Author Info

  • Ariaster B. Chimeli

    (Ohio University)

  • Rodrigo R. Soares

    ()
    (Department of Economics PUC-Rio)

Abstract

Agents operating in illegal markets cannot resort to the justice system to guarantee property rights, to enforce contracts, or to seek protection from competitors’ improper behaviors. In these contexts, violence is used to enforce previous agreements and to fight for market share. This relationship plays a major role in the debate on the pernicious effects of the illegality of drug trade. This paper explores a singular episode of transition of a market from legal to illegal to provide a first piece of evidence on the causal effect of illegality on systemic violence. Brazil has historically been the main world producer of big leaf mahogany (a tropical wood). Starting in the 1990s, policies restricting extraction and trade of mahogany, culminating with prohibition, were implemented. First, we present evidence that large scale mahogany trade persisted after prohibition, through misclassification of mahogany exports as “other tropical timber species.” Second, we document relative increases in violence after prohibition in areas with: (i) higher share of mahogany exports before prohibition; (ii) higher suspected illegal mahogany activity after prohibition; and (iii) natural occurrence of mahogany. We believe this is one of the first documented experiences of increase in violence following the transition of a market from legal to illegal.

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Bibliographic Info

Paper provided by Department of Economics PUC-Rio (Brazil) in its series Textos para discussão with number 592.

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Length: 45p
Date of creation: Aug 2011
Date of revision:
Handle: RePEc:rio:texdis:592

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Keywords: illegal markets; violence; homicide; mahogany; Brazil Jel Codes: K42; O13; O17; Q58;

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  1. Gary S. Becker & Kevin M. Murphy & Michael Grossman, 2006. "The Market for Illegal Goods: The Case of Drugs," Journal of Political Economy, University of Chicago Press, vol. 114(1), pages 38-60, February.
  2. Fisman, Raymond & Wei, Shang-Jin, 2001. "Tax Rates and Tax Evasion: Evidence from 'Missing Imports' in China," CEPR Discussion Papers 3089, C.E.P.R. Discussion Papers.
  3. Soares, Rodrigo R., 2004. "Development, crime and punishment: accounting for the international differences in crime rates," Journal of Development Economics, Elsevier, vol. 73(1), pages 155-184, February.
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  6. John J. Donohue III & Benjamin Ewing & David Peloquin, 2011. "Rethinking America's Illegal Drug Policy," NBER Working Papers 16776, National Bureau of Economic Research, Inc.
  7. Erwin H. Bulte & G. Cornelis van Kooten, 1999. "Economics of Antipoaching Enforcement and the Ivory Trade Ban," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(2), pages 453-466.
  8. Adda, Jerome & McConnell, Brendon & Rasul, Imran, 2014. "Crime and the Depenalization of Cannabis Possession: Evidence from a Policing Experiment," CEPR Discussion Papers 9914, C.E.P.R. Discussion Papers.
  9. Alston, Lee J. & Libecap, Gary D. & Mueller, Bernardo, 2000. "Land Reform Policies, the Sources of Violent Conflict, and Implications for Deforestation in the Brazilian Amazon," Journal of Environmental Economics and Management, Elsevier, vol. 39(2), pages 162-188, March.
  10. Miron, Jeffrey A, 2001. "Violence, Guns, and Drugs: A Cross-Country Analysis," Journal of Law and Economics, University of Chicago Press, vol. 44(2), pages 615-33, October.
  11. Medina, Carlos & Martínez, Hermes, 2003. "Violence and Drug Prohibition in Colombia," MPRA Paper 6935, University Library of Munich, Germany.
  12. Donohue, John J, III & Levitt, Steven D, 1998. "Guns, Violence, and the Efficiency of Illegal Markets," American Economic Review, American Economic Association, vol. 88(2), pages 463-67, May.
  13. 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.
  14. Ariaster B. Chimeli & Roy G. Boyd, 2010. "Prohibition and the Supply of Brazilian Mahogany," Land Economics, University of Wisconsin Press, vol. 86(1), pages 191-208.
  15. Emily Greene Owens, 2011. "Are Underground Markets Really More Violent? Evidence from Early 20th Century America," American Law and Economics Review, Oxford University Press, vol. 13(1), pages 1-44.
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