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Illegal Drugs and Public Corruption: Crack Based Evidence from California

Author

Listed:
  • Alessandro Flamini
  • Babak Jahanshahi
  • Kamiar Mohaddes

Abstract

Do illegal drugs foster public corruption? To estimate the causal effect of drugs on public corruption in California, we adopt the synthetic control method and exploit the fact that crack cocaine markets emerged asynchronously across the United States. We focus on California because crack arrived here in 1981, before reaching any other state. Our results show that public corruption more than tripled in California in the first three years following the arrival of crack cocaine. We argue that this resulted from the particular characteristics of illegal drugs: a large trade-off between profits and law enforcement, due to a cheap technology and rigid demand. Such a trade-off fosters a convergence of interests between criminals and corrupted public officials resulting in a positive causal impact of illegal drugs on corruption.

Suggested Citation

  • Alessandro Flamini & Babak Jahanshahi & Kamiar Mohaddes, 2018. "Illegal Drugs and Public Corruption: Crack Based Evidence from California," CAMA Working Papers 2018-39, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2018-39
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    File URL: https://crawford.anu.edu.au/sites/default/files/2025-01/39_2018_flamini_jahanshadi_mohaddes_0.pdf
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    2. Caglayan, Mustafa & Flamini, Alessandro & Jahanshahi, Babak, 2021. "Hindering human capital accumulation: A hidden cost of the silent mafia?," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 828-845.
    3. Lucchese, Elena & Roberti, Paolo, 2024. "When citizens legalize drugs," European Journal of Political Economy, Elsevier, vol. 85(C).

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    Keywords

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    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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