IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v126y2016ipap255-275.html
   My bibliography  Save this article

The economics of the war on illegal drug production and trafficking

Author

Listed:
  • Mejia, Daniel
  • Restrepo, Pascual

Abstract

We model the war on drugs in source countries as a conflict over scarce inputs in successive levels of the production and trafficking chain, and study how policies aimed at different stages affect prices and quantities in upstream and downstream markets. We use the model to study Plan Colombia, a large intervention aimed at reducing the downstream supply of cocaine by targeting illicit crops and blocking the transport of cocaine outside this source country. The model fits the main patterns found in the data, including the displacement of the drug trade to other source countries, the increase in coca crops’ productivity as a response to eradication, and the lack of apparent effects in consumer markets. We use a reasonable parametrization of our model to evaluate the cost-effectiveness of different policies implemented under Plan Colombia. We find that the marginal cost to the U.S. of reducing cocaine transacted in retail markets by one kilogram is $940,000, if it subsidizes eradication efforts; and $175,000, if it subsidizes interdiction efforts in Colombia.

Suggested Citation

  • Mejia, Daniel & Restrepo, Pascual, 2016. "The economics of the war on illegal drug production and trafficking," Journal of Economic Behavior & Organization, Elsevier, vol. 126(PA), pages 255-275.
    • Handle: RePEc:eee:jeborg:v:126:y:2016:i:pa:p:255-275
    DOI: 10.1016/j.jebo.2015.11.003
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167268115002930
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jebo.2015.11.003?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Daniel Mejía, 2008. "The War on Illegal Drugs in Producer and Consumer Countries: A Simple Analytical Framework," CESifo Working Paper Series 2459, CESifo.
    2. Daniel Mejía & Pascual Restrepo & Sandra V. Rozo, 2017. "On the Effects of Enforcement on Illegal Markets: Evidence from a Quasi-Experiment in Colombia," The World Bank Economic Review, World Bank, vol. 31(2), pages 570-594.
    3. Joshua D. Angrist & Adriana D. Kugler, 2008. "Rural Windfall or a New Resource Curse? Coca, Income, and Civil Conflict in Colombia," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 191-215, May.
    4. Oeindrila Dube & Suresh Naidu, 2010. "Bases, Bullets, and Ballots: The Effect of U.S. Military Aid on Political Conflict in Colombia," Working Papers 197, Center for Global Development.
    5. Hirshleifer, Jack, 1991. "The Technology of Conflict as an Economic Activity," American Economic Review, American Economic Association, vol. 81(2), pages 130-134, May.
    6. Reuter, Peter, 2008. "Can production and trafficking of illicit drugs be reduced or merely shifted ?," Policy Research Working Paper Series 4564, The World Bank.
    7. Melissa Dell, 2015. "Trafficking Networks and the Mexican Drug War," American Economic Review, American Economic Association, vol. 105(6), pages 1738-1779, June.
    8. Saffer, Henry & Chaloupka, Frank, 1999. "The Demand for Illicit Drugs," Economic Inquiry, Western Economic Association International, vol. 37(3), pages 401-411, July.
    9. Chumacero, Romulo A., 2008. "Evo, Pablo, Tony, Diego, and Sonny - general equilibrium analysis of the illegal drugs market," Policy Research Working Paper Series 4565, The World Bank.
    10. Herschel Grossman & Daniel Mejía, 2008. "The war against drug producers," Economics of Governance, Springer, vol. 9(1), pages 5-23, January.
    11. Daniel Mejía & Carlos E. Posada, 2007. "Cocaine Production and Trafficking: What do we know?," Borradores de Economia 3955, Banco de la Republica.
    12. C. Peter Rydell & Jonathan P. Caulkins & Susan S. Everingham, 1996. "Enforcement or Treatment? Modeling the Relative Efficacy of Alternatives for Controlling Cocaine," Operations Research, INFORMS, vol. 44(5), pages 687-695, October.
    13. Henry Saffer & Frank J. Chaloupka, 1999. "Demographic Differentials in the Demand for Alcohol and Illicit Drugs," NBER Chapters, in: The Economic Analysis of Substance Use and Abuse: An Integration of Econometric and Behavioral Economic Research, pages 187-212, National Bureau of Economic Research, Inc.
    14. Daniel Mejia & Daniel M. Rico, 2010. "La microeconomía de la producción y tráfico de cocaína en Colombia," Documentos CEDE 7293, Universidad de los Andes, Facultad de Economía, CEDE.
    15. Stergios Skaperdas, 1996. "Contest success functions (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(2), pages 283-290.
    16. Daniel Mejía & Pascual Restrepo, 2013. "Bushes and Bullets: Illegal Cocaine Markets and Violence in Colombia," Documentos CEDE 11934, Universidad de los Andes, Facultad de Economía, CEDE.
    17. Gernot Tragler & Jonathan P. Caulkins & Gustav Feichtinger, 2001. "Optimal Dynamic Allocation of Treatment and Enforcement in Illicit Drug Control," Operations Research, INFORMS, vol. 49(3), pages 352-362, June.
    18. 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.
    19. Daniel Mejía & Pascual Restrepo, 2008. "The War on Illegal Drug Production and Trafficking: An Economic Evaluation of Plan Colombia," Documentos CEDE 5123, Universidad de los Andes, Facultad de Economía, CEDE.
    20. Daniel Mejía & Pascual Restrepo, 2008. "The War on Illegal Drug Production and Trafficking: An Economic Evaluation of Plan Colombia," Documentos CEDE 005123, Universidad de los Andes - CEDE.
    21. MacCoun,Robert J. & Reuter,Peter, 2001. "Drug War Heresies," Cambridge Books, Cambridge University Press, number 9780521799973, Enero-Abr.
    22. 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.
    23. 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 615-633, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Daniel Mejía & Pascual Restrepo, 2008. "The War on Illegal Drug Production and Trafficking: An Economic Evaluation of Plan Colombia," Documentos CEDE 5123, Universidad de los Andes, Facultad de Economía, CEDE.
    2. Lim, King Yoong & Morris, Diego, 2020. "The economics of the illicit drugs-for-guns trade and growth," Economic Modelling, Elsevier, vol. 91(C), pages 218-232.
    3. Daniel Mejía, 2008. "The War on Illegal Drugs in Producer and Consumer Countries: A Simple Analytical Framework," CESifo Working Paper Series 2459, CESifo.
    4. Daniel Mejía & Pascual Restrepo, 2008. "The War on Illegal Drug Production and Trafficking: An Economic Evaluation of Plan Colombia," Documentos CEDE 005123, Universidad de los Andes - CEDE.
    5. Mounu Prem & Juan F. Vargas & Daniel Mejía, 2023. "The Rise and Persistence of Illegal Crops: Evidence from a Naive Policy Announcement," The Review of Economics and Statistics, MIT Press, vol. 105(2), pages 344-358, March.
    6. Juan Camilo Castillo, Daniel Mejia, and Pascual Restrepo, 2014. "Scarcity without Leviathan: The Violent Effects of Cocaine Supply Shortages in the Mexican Drug War - Working Paper 356," Working Papers 356, Center for Global Development.
    7. Edward M. Shepard & Paul R. Blackely, 2010. "Economics of Crime and Drugs: Prohibition and Public Policies for Illicit Drug Control," Chapters, in: Bruce L. Benson & Paul R. Zimmerman (ed.), Handbook on the Economics of Crime, chapter 10, Edward Elgar Publishing.
    8. Muñoz-Mora, Juan Carlos & Tobón, Santiago & d’Anjou, Jesse Willem, 2018. "The role of land property rights in the war on illicit crops: Evidence from Colombia," World Development, Elsevier, vol. 103(C), pages 268-283.
    9. Maria Micaela Sviatschi, 2019. "Making a Narco: Childhood Exposure to Illegal Labor Markets and Criminal Life Paths," Working Papers 2019-28, Princeton University. Economics Department..
    10. Dhaval Dave, 2004. "Illicit Drug Use Among Arrestees and Drug Prices," NBER Working Papers 10648, National Bureau of Economic Research, Inc.
    11. Freylejer, Leandro & Orr, Scott, 2023. "Import substitution in illicit methamphetamine markets," Journal of International Economics, Elsevier, vol. 140(C).
    12. Juan Camilo Castillo & Daniel Mejía & Pascual Restrepo, 2020. "Scarcity without Leviathan: The Violent Effects of Cocaine Supply Shortages in the Mexican Drug War," The Review of Economics and Statistics, MIT Press, vol. 102(2), pages 269-286, May.
    13. Botero Degiovanni, Hernan, 2013. "The Effects of Drug Enforcement on Violence in Colombia 1999-2010: A Spatial Econometric Approach," MPRA Paper 49459, University Library of Munich, Germany.
    14. Miguel Serrano López, 2020. "Violencia y corrupción como estrategias de maximización en mercados ilegales: el caso de la coca," Revista Cuadernos de Economia, Universidad Nacional de Colombia, FCE, CID, vol. 39(81), pages 949-974, July.
    15. Dave, Dhaval, 2006. "The effects of cocaine and heroin price on drug-related emergency department visits," Journal of Health Economics, Elsevier, vol. 25(2), pages 311-333, March.
    16. Leonardo Raffo López & José Luis Segura, 2015. "Las redes del narcotráfico y sus interacciones: un modelo teórico," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 17(32), pages 183-212, January-J.
    17. Juan Carlos Mu�oz-Mora & Santiago Tob�n-Zapata & Jesse d'Anjou, 2014. "Does land titling matter? The role of land property rights in the war on illicit crops in Colombia," HiCN Working Papers 168, Households in Conflict Network.
    18. Rubio-Ramos, Melissa, 2024. "Trust, violence, and coca," Journal of Development Economics, Elsevier, vol. 167(C).
    19. Maria Micaela Sviatschi, 2018. "Making a Narco: Childhood Exposure to Illegal Labor Markets and Criminal Life Paths," Working Papers sviatschi_making-a-narco_, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
    20. Leonardo Raffo López, 2010. "Narcotráfico y conflicto: ¿por qué bajó el precio de la cocaína?," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 12(23), pages 229-258, July-Dece.

    More about this item

    Keywords

    Hard drugs; Conflict; War on drugs; Plan Colombia;
    All these keywords.

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:126:y:2016:i:pa:p:255-275. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jebo .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.