Domestic drug prohibition as a source of foreign institutional instability: an analysis of the multinational extralegal enterprise
The unintended consequences of prohibition on domestic markets are well documented [J. Econ. Perspectives 9 (1995) 175]. The enforcement of these prohibitions denies the extralegal enterprise (XLE) access to property rights and contract enforcement from the state. Consequently, XLEs must provide their own enforcement through the application of coercion and violence [J. Legal Stud. 18 (1989) 403; Public Choice 68 (1994) 185]. In this paper we focus on multinational activity by multinational XLEs in the illegal drug trade, examining the applicability of Dunning's ownership, location or internalization (OLI) paradigm [J. Int. Bus. Stud. 11 (1980) 9]. We find that the location and internalization aspects of the paradigm apply well, while the ownership aspect does not. Furthermore, we argue that wherever XLEs operate, their coercive powers distort the incentives in resource and goods markets, increase corruption and reduce institutional stability. Their activities substantially reduce the size of the productive exchange economy and the attractiveness of the location for investment by legitimate businesses. These distortions are amplified by the enforcement of prohibition by governments in target market countries.
Volume (Year): 9 (2003)
Issue (Month): 3 ()
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/601266/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/journaldescription.cws_home/601266/bibliographic|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul, Chris & Wilhite, Allen W, 1994. "Illegal Markets and the Social Costs of Rent-Seeking," Public Choice, Springer, vol. 79(1-2), pages 105-115, April.
- Miron, Jeffrey A, 1999.
"Violence and the U.S. Prohibitions of Drug and Alcohol,"
American Law and Economics Review,
Oxford University Press, vol. 1(1-2), pages 78-114, Fall.
- Jeffrey A. Miron, 1998. "Violence and the U.S. Prohibition of Drugs and Alcohol," Papers 0090, Boston University - Industry Studies Programme.
- Jeffrey A. Miron, 1999. "Violence and the U.S. Prohibition of Drugs and Alcohol," NBER Working Papers 6950, National Bureau of Economic Research, Inc.
- Gaviria, Alejandro, 2000. "Increasing returns and the evolution of violent crime: the case of Colombia," Journal of Development Economics, Elsevier, vol. 61(1), pages 1-25, February.
- Gaviria, Alejandro, 1998. "Increasing Returns and the Evolution of Violent Crime: The Case of Columbia," University of California at San Diego, Economics Working Paper Series qt6x42726z, Department of Economics, UC San Diego.
- Gary S. Becker & George J. Stigler, 1974. "Law Enforcement, Malfeasance, and Compensation of Enforcers," The Journal of Legal Studies, University of Chicago Press, vol. 3(1), pages 1-18, January.
- Shang-Jin Wei, 2000. "How Taxing is Corruption on International Investors?," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 1-11, February.
- Shang-Jin Wei, 1997. "How Taxing is Corruption on International Investors?," NBER Working Papers 6030, National Bureau of Economic Research, Inc.
- Shang-Jin Wei, 1997. "How Taxing is Corruption on International Investors?," William Davidson Institute Working Papers Series 63, William Davidson Institute at the University of Michigan.
- Nathan Fagre & Louis T Wells, 1982. "Bargaining Power of Multinationals and Host Governments," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 13(2), pages 9-24, June.
- Benson, Bruce L. & Rasmussen, David W. & Kim, Iljoong, 1998. "Deterrence and Public Policy: Trade-Offs in the Allocation of Police Resources," International Review of Law and Economics, Elsevier, vol. 18(1), pages 77-100, March.
- Lott, John R, Jr, 1992. "Do We Punish High Income Criminals Too Heavily?," Economic Inquiry, Western Economic Association International, vol. 30(4), pages 583-608, October.
- Chang, Juin-jen & Lai, Ching-chong & Yang, C. C., 2000. "Casual police corruption and the economics of crime:: Further results," International Review of Law and Economics, Elsevier, vol. 20(1), pages 35-51, March.
- Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1993. "Why Is Rent-Seeking So Costly to Growth?," American Economic Review, American Economic Association, vol. 83(2), pages 409-414, May.
- Baumol, William J., 1996. "Entrepreneurship: Productive, unproductive, and destructive," Journal of Business Venturing, Elsevier, vol. 11(1), pages 3-22, January.
- Baumol, William J, 1990. "Entrepreneurship: Productive, Unproductive, and Destructive," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 893-921, October.
- Congleton, Roger D., 1989. "Efficient status seeking: Externalities, and the evolution of status games," Journal of Economic Behavior & Organization, Elsevier, vol. 11(2), pages 175-190, March.
- Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
- Block, M K & Heineke, J M, 1975. "A Labor Theoretic Analysis of the Criminal Choice," American Economic Review, American Economic Association, vol. 65(3), pages 314-325, June.
- Peltzman, Sam, 1976. "Toward a More General Theory of Regulation," Journal of Law and Economics, University of Chicago Press, vol. 19(2), pages 211-240, August.
- Sam Peltzman, 1976. "Toward a More General Theory of Regulation," NBER Working Papers 0133, National Bureau of Economic Research, Inc.
- Amit, Raphael & Muller, Eitan & Cockburn, Iain, 1995. "Opportunity costs and entrepreneurial activity," Journal of Business Venturing, Elsevier, vol. 10(2), pages 95-106, March.
- Lott, John R, Jr & Roberts, Russell D, 1989. "Why Comply: One-Sided Enforcement of Price Controls and Victimless Crime Laws," The Journal of Legal Studies, University of Chicago Press, vol. 18(2), pages 403-414, June. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:intman:v:9:y:2003:i:3:p:335-349. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.