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Colombia And The War On Drugs, How Short Is The Short Run?

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  • Juan Carlos Echeverry

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Abstract

In the nineties, Colombia became the main supplier of cocaine to the world markets. Estimations of total production and net revenues indicate that for 2001 this illegal business might have been responsible for 2% to 4% of the country´s GDP, depending on the number of hectares of coca leaf planted and productivity per hectare contemplated by different analysts. The war on drugs, specially its supply side for which Colombia is held responsible, consists of obstructing all the steps of this traffic, from curtailing the inflow of inputs, destroying crops and processing units, until transportation interdiction and dismantling domestic money laundering. This war has cost dearly to Colombia, both economically and institutionally. The direct effect of the war on drugs is an increase of cocaine prices. Therefore, its efficacy lies on a variable that measures consumers´ responsiveness to price increases, i.e. the price elasticity of demand in the U.S. The empirical evidence in this respect indicates a troubling result: it is inelastic (insensitive) in the short run, but elastic in the long run. The war on drugs makes sense only in the second scenario. Therefore, the question is: how short is the short run? The jury is still out in this respect.

Suggested Citation

  • Juan Carlos Echeverry, 2004. "Colombia And The War On Drugs, How Short Is The Short Run?," DOCUMENTOS CEDE 002133, UNIVERSIDAD DE LOS ANDES-CEDE.
  • Handle: RePEc:col:000089:002133
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    File URL: http://economia.uniandes.edu.co/publicaciones/d2004-13.pdf
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    References listed on IDEAS

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    1. Steven D. Levitt, 2003. "Review of Drug War Heresies by MacCoun and Reuter," Journal of Economic Literature, American Economic Association, vol. 41(2), pages 540-544, June.
    2. Saffer, Henry & Chaloupka, Frank, 1999. "The Demand for Illicit Drugs," Economic Inquiry, Western Economic Association International, vol. 37(3), pages 401-411, July.
    3. H Saffer & FJ Chaloupka & D Dave, 2001. "State Drug Control Spending And Illicit Drug Participation," Contemporary Economic Policy, Western Economic Association International, vol. 19(2), pages 150-161, April.
    4. 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.
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    Cited by:

    1. Herschel Grossman & Daniel Mejía, 2008. "The war against drug producers," Economics of Governance, Springer, vol. 9(1), pages 5-23, January.
    2. 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.
    3. Juan Carlos Echeverry, 2009. "Lessons from Colombian Economic Development," DOCUMENTOS CEDE 005541, UNIVERSIDAD DE LOS ANDES-CEDE.
    4. Laura Atuesta & Geoffrey J.D. Hewings, 2013. "Economic Welfare Analysis Of The Legalization Of Drugs: A Cge Microsimulation Model For Colombia," Economic Systems Research, Taylor & Francis Journals, vol. 25(2), pages 190-211, March.
    5. Hernán Maldonado Jaramillo, 2006. "Anti-Drug Policies: On The Wrong Path To Peace," DOCUMENTOS CEDE 002011, UNIVERSIDAD DE LOS ANDES-CEDE.

    More about this item

    Keywords

    War on drugs;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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