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The Economics of the War on Illegal Drug Production and Trafficking

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  • Daniel Mejia
  • Pascual Restrepo

Abstract

We model the war on drugs in source countries as a conflict over scarce inputs of successive levels of the production and trafficking chain. We explicitly model the vertical structure of the drug trade as being composed of several stages, and study how different policies aimed at different stages affect the supply, prices and input markets. We use the model to study Plan Colombia, a large scale intervention in Colombia aimed at reducing the supply of cocaine by targeting illicit crops and illegal armed groups’ control of the routes used to transport drugs outside of the country - two of the main inputs of the production and trafficking chain. The model fits many of the patterns found in the data and sheds light on certain puzzling findings. For a reasonable set of parameters that match well the data on the war on drugs under Plan Colombia, our model predicts that the marginal cost to the U.S. of reducing the amount of cocaine transacted in retail markets by one kilogram is $1’631.900 if resources are allocated to eradication efforts; and $267.450 per kilogram if resources are allocated to interdiction efforts.

Suggested Citation

  • Daniel Mejia & Pascual Restrepo, 2013. "The Economics of the War on Illegal Drug Production and Trafficking," Documentos CEDE 11935, Universidad de los Andes, Facultad de Economía, CEDE.
  • Handle: RePEc:col:000089:011935
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    Cited by:

    1. Giacomo Battiston & Gianmarco Daniele & Marco Le Moglie & Paolo Pinotti, 2022. "Fueling Organized Crime: The Mexican War on Drugs and Oil Thefts," "Marco Fanno" Working Papers 0286, Dipartimento di Scienze Economiche "Marco Fanno".
    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. Maria Micaela Sviatschi, 2022. "Making a NARCO: Childhood Exposure to Illegal Labor Markets and Criminal Life Paths," Econometrica, Econometric Society, vol. 90(4), pages 1835-1878, July.
    4. Samuel Lordemus & Noemi Kreif & Rodrigo Moreno-Serra, 2021. "Public healthcare financing during counterinsurgency efforts: Evidence from Colombia," HiCN Working Papers 348, Households in Conflict Network.
    5. Iva Trako & Maria Micaela Sviatschi & Guadalupe Kavanaugh, 2018. "Access to Justice, Gender Violence and Children: Evidence from Women’s Justice Centers in Peru," Working Papers 2018-03, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
    6. Vasquez Escallon, Juanita, 2015. "When too much punishment decreases legality. The case of coca-reducing policies in Colombia," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113156, Verein für Socialpolitik / German Economic Association.
    7. Greenfield, Victoria A. & Bond, Craig A. & Crane, Keith, 2017. "A household model of opium-poppy cultivation in Afghanistan," Journal of Policy Modeling, Elsevier, vol. 39(5), pages 741-761.
    8. 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.
    9. 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..
    10. Pinedo, Wilman J. Iglesias, 2022. "The Effect of Plan Colombia on the Value of Legal Agricultural Production," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322605, Agricultural and Applied Economics Association.
    11. Juan Pablo Cote, 2019. "The Effect of Interdiction on Coca Cultivation in Colombia," Documentos CEDE 17316, Universidad de los Andes, Facultad de Economía, CEDE.
    12. Hale Utar, 2018. "Firms and Labor in Times of Violence: Evidence from the Mexican Drug War," CESifo Working Paper Series 7345, CESifo.
    13. Carvajal, Hernán, 2023. "Efectos de la suspensión de las aspersiones aéreas con glifosato sobre la deserción escolar en Colombia," Documentos CEDE 20307, Universidad de los Andes, Facultad de Economía, CEDE.
    14. Diego A. Martin, 2023. "The Impact of a Rise in Expected Income on Child Labor: Evidence From Coca Production in Colombia," CID Working Papers 150a, Center for International Development at Harvard University.
    15. Freylejer, Leandro & Orr, Scott, 2023. "Import substitution in illicit methamphetamine markets," Journal of International Economics, Elsevier, vol. 140(C).
    16. 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..
    17. Manuel Sánchez-Pérez & María Belén Marín-Carrillo & María Dolores Illescas-Manzano & Zohair Souilim, 2023. "Understanding the illegal drug supply chain structure: a value chain analysis of the supply of hashish to Europe," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-13, December.
    18. Leonardo Raffo López & Javier Andrés Castro & Alexander Díaz España, 2016. "Los efectos globo en los cultivos de coca en la región andina (1990-2009)," Apuntes del Cenes, Universidad Pedagógica y Tecnológica de Colombia, vol. 35(61), pages 207-2036, January.
    19. Camacho, Adriana & Mejía, Daniel, 2017. "The health consequences of aerial spraying illicit crops: The case of Colombia," Journal of Health Economics, Elsevier, vol. 54(C), pages 147-160.
    20. Arias-R., Omar Fdo. & Aza-Jacome, Alfonso, 2014. "From monopsonistic insurgent groups to oligopolistic cocaine traffickers: the market of cocaine in Colombia," MPRA Paper 60000, University Library of Munich, Germany.

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    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

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