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The Effect of Cocaine Prices on Crime

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  • Jeffrey DeSimone

Abstract

The relationship between cocaine prices and crime has critical implications for U.S. drug policy, but is theoretically indeterminate because cocaine price changes affect crime through changes in both cocaine consumption and expenditures. This paper investigates this relationship in annual data from 1981-95 on 29 large U.S. cities, accounting for simultaneity by using two-stage least squares with measures of wholesale supply factors and retail enforcement intensity as instruments for cocaine prices. Controlling for prices of other drugs, deterrence, socioeconomic factors, and city and year-specific effects, a strong negative relationship exists between cocaine prices and six of seven FBI index crimes. Copyright 2001 by Oxford University Press.

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Bibliographic Info

Paper provided by East Carolina University, Department of Economics in its series Working Papers with number 9907.

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Date of creation: Aug 1999
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Handle: RePEc:wop:eacaec:9907

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  1. Jeff Grogger & Mike Willis, 1998. "The Introduction of Crack Cocaine and the Rise in Urban Crime Rates," NBER Working Papers 6353, National Bureau of Economic Research, Inc.
  2. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169.
  3. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November.
  4. Frank J. Chaloupka & Michael Grossman & John A. Tauras, 1998. "The Demand for Cocaine and Marijuana by Youth," NBER Working Papers 6411, National Bureau of Economic Research, Inc.
    • Frank J. Chaloupka & Michael Grossman & John A. Tauras, 1999. "The Demand for Cocaine and Marijuana by Youth," NBER Chapters, in: The Economic Analysis of Substance Use and Abuse: An Integration of Econometrics and Behavioral Economic Research, pages 133-156 National Bureau of Economic Research, Inc.
  5. Ehrlich, Isaac, 1973. "Participation in Illegitimate Activities: A Theoretical and Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 521-65, May-June.
  6. Caulkins Jonathan P., 1995. "Domestic Geographic Variation in Illicit Drug Prices," Journal of Urban Economics, Elsevier, vol. 37(1), pages 38-56, January.
  7. Steven D. Levitt, 1995. "Using Electoral Cycles in Police Hiring to Estimate the Effect of Policeon Crime," NBER Working Papers 4991, National Bureau of Economic Research, Inc.
  8. Bruce L. Benson & David W. Rasmussen, 1991. "Relationship Between Illicit Drug Enforcement Policy And Property Crimes," Contemporary Economic Policy, Western Economic Association International, vol. 9(4), pages 106-115, October.
  9. White, Michael D & Luksetich, William A, 1983. "Heroin: Price Elasticity and Enforcement Strategies," Economic Inquiry, Western Economic Association International, vol. 21(4), pages 557-64, October.
  10. Grossman, Michael & Chaloupka, Frank J., 1998. "The demand for cocaine by young adults: a rational addiction approach," Journal of Health Economics, Elsevier, vol. 17(4), pages 427-474, August.
  11. Jeffrey DeSimone, 1999. "Illegal Drug Use and Labor Supply," Working Papers 9906, East Carolina University, Department of Economics.
  12. Henry Saffer & Frank Chaloupka, 1995. "The Demand for Illicit Drugs," NBER Working Papers 5238, National Bureau of Economic Research, Inc.
  13. Niskanen, William A., 1992. "Economists and drug policy," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 36(1), pages 223-248, July.
  14. Mast, Brent D & Benson, Bruce L & Rasmussen, David W, 2000. " Entrepreneurial Police and Drug Enforcement Policy," Public Choice, Springer, vol. 104(3-4), pages 285-308, September.
  15. Miron, Jeffrey A., 1992. "Economists and drug policy : A comment," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 36(1), pages 249-259, July.
  16. Silverman, Lester P. & Spruill, Nancy L., 1977. "Urban crime and the price of heroin," Journal of Urban Economics, Elsevier, vol. 4(1), pages 80-103, January.
  17. Lott, John R, Jr & Mustard, David B, 1997. "Crime, Deterrence, and Right-to-Carry Concealed Handguns," The Journal of Legal Studies, University of Chicago Press, vol. 26(1), pages 1-68, January.
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Cited by:
  1. Kuziemko, Ilyana & Levitt, Steven D., 2004. "An empirical analysis of imprisoning drug offenders," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 2043-2066, August.
  2. Sara Markowitz & Erik Nesson & Eileen Poe-Yamagata & Curtis Florence & Partha Deb & Tracy Andrews & Sarah Beth L. Barnett, 2012. "Estimating the Relationship between Alcohol Policies and Criminal Violence and Victimization," NBER Working Papers 17918, National Bureau of Economic Research, Inc.
  3. Markowitz, Sara, 2005. "Alcohol, Drugs and Violent Crime," International Review of Law and Economics, Elsevier, vol. 25(1), pages 20-44, March.
  4. Cook, Philip J. & Durrance, Christine Piette, 2013. "The virtuous tax: Lifesaving and crime-prevention effects of the 1991 federal alcohol-tax increase," Journal of Health Economics, Elsevier, vol. 32(1), pages 261-267.
  5. Jeff DeSimone & Matthew C. Farrelly, . "Price and Enforcement Effects on Cocaine and Marijuana Demand," Working Papers 0101, East Carolina University, Department of Economics.
  6. Sara Markowitz, 2000. "An Economic Analysis of Alcohol, Drugs, and Violent Crime in the National Crime Victimization Survey," NBER Working Papers 7982, National Bureau of Economic Research, Inc.
  7. Mireia Jofre-Bonet & Jody L. Sindelar, 2002. "Drug Treatment as a Crime Fighting Tool," NBER Working Papers 9038, National Bureau of Economic Research, Inc.
  8. Rosalie Liccardo Pacula & Beau Kilmer, 2003. "Marijuana and Crime: Is there a Connection Beyond Prohibition?," NBER Working Papers 10046, National Bureau of Economic Research, Inc.
  9. Philip J. Cook & Christine Piette Durrance, 2011. "The Virtuous Tax: Lifesaving and Crime-Prevention Effects of the 1991 Federal Alcohol-Tax Increase," NBER Working Papers 17709, National Bureau of Economic Research, Inc.

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