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Crime and Drugs : An Economic Approach

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Author Info

  • Doyle, Chris

    (London Business School)

  • Smith, Jennifer C

    (Department of Economics, University of Warwick)

Abstract

We present a model which ties together rational drug consumption, taxation, crime and other drug-related externalities. Drug control policy is addressed using an optimal tax framework. Consumption, possession and production of a drug may be prohibited, legalized or decriminalized. In all regimes illicit production of a drug may take place and drug-related crime occurs. We show that illicit drug production, the price elasticity of demand for a drug, the addictive nature of a drug, the effectiveness of drug enforcement strategies, and income distribution all influence optimal (second best) policy. Prohibition is contrasted with decriminalization and legalization, and where legalization yields a higher welfare than prohibition we show that this can be associated with greater drug-related crime and more drug addiction. The model is discussed in the context of US National Drug Control Strategy.

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File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/crimdrug.pdf
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Bibliographic Info

Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 477.

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Length: 32 pages
Date of creation: 1997
Date of revision:
Handle: RePEc:wrk:warwec:477

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Related research

Keywords: Crime ; decriminalization ; drugs ; externalities ; legalization ; optimal tax ; prohibition;

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References

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  1. Becker, Gary S & Murphy, Kevin M, 1988. "A Theory of Rational Addiction," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(4), pages 675-700, August.
  2. Becker, Gary S & Grossman, Michael & Murphy, Kevin M, 1991. "Rational Addiction and the Effect of Price on Consumption," American Economic Review, American Economic Association, American Economic Association, vol. 81(2), pages 237-41, May.
  3. Lee, Li Way, 1993. "Would Harassing Drug Users Work?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(5), pages 939-59, October.
  4. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 1-54 National Bureau of Economic Research, Inc.
  5. Richard B. Freeman, 1996. "Why Do So Many Young American Men Commit Crimes and What Might We Do about It?," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 10(1), pages 25-42, Winter.
  6. Peter A. Diamond, 1973. "Consumption Externalities and Imperfect Corrective Pricing," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 4(2), pages 526-538, Autumn.
  7. Shavell, Steven, 1993. "The Optimal Structure of Law Enforcement," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 36(1), pages 255-87, April.
  8. John J. DiIulio, 1996. "Help Wanted: Economists, Crime and Public Policy," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 10(1), pages 3-24, Winter.
  9. Frank J. Chaloupka, 1990. "Rational Addictive Behavior and Cigarette Smoking," NBER Working Papers 3268, National Bureau of Economic Research, Inc.
  10. Peter A. Diamond & J. A. Mirrlees, 1968. "Optimal Taxation and Public Production," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 22, Massachusetts Institute of Technology (MIT), Department of Economics.
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Cited by:
  1. Donici, Andreea Nicoleta/NA & Maha, Andreea/A, 2012. "The Impact of soft drug legalization on Romania," MPRA Paper 36191, University Library of Munich, Germany.

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