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Tráfico de drogas, corrupción e inversión extranjera directa: Teoría y evidencia
[Drug trafficking, corruption and foreign direct investment: Theory and evidence]

Author

Listed:
  • Espinosa Ramirez, Rafael
  • Ruiz-Porras, Antonio

Abstract

We develop a microeconomic model to explain why sanction policies used by developed countries have had ambiguous effects to reduce drug trafficking in developing countries. In the model, a country receives FDI depending on its government effort to reduce drug exports. However, local drug producers lobby and offer contributions whose impact depends on the level of government corruption. The government sets the level of enforcement against drug trafficking taking into account the contributions paid and the welfare of the local habitants. Analytically, we use the common agency theory to justify and explain diverse sanction policy outcomes. We also show evidence about the relationships among drug trafficking, corruption and FDI for some Latin-American countries.

Suggested Citation

  • Espinosa Ramirez, Rafael & Ruiz-Porras, Antonio, 2012. "Tráfico de drogas, corrupción e inversión extranjera directa: Teoría y evidencia
    [Drug trafficking, corruption and foreign direct investment: Theory and evidence]
    ," MPRA Paper 36674, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:36674
    as

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    File URL: https://mpra.ub.uni-muenchen.de/36674/1/MPRA_paper_36674.pdf
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    References listed on IDEAS

    as
    1. Alesina, Alberto & Perotti, Roberto, 1996. "Income distribution, political instability, and investment," European Economic Review, Elsevier, vol. 40(6), pages 1203-1228, June.
    2. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    3. Dixit, Avinash & Grossman, Gene M & Helpman, Elhanan, 1997. "Common Agency and Coordination: General Theory and Application to Government Policy Making," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 752-769, August.
    4. Perotti, Roberto & Alesina, Alberto, 1996. "Income Distribution, Political Instability, and Investment," Scholarly Articles 4553018, Harvard University Department of Economics.
    5. Brander, James A. & Spencer, Barbara J., 1987. "Foreign direct investment with unemployment and endogenous taxes and tariffs," Journal of International Economics, Elsevier, vol. 22(3-4), pages 257-279, May.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Drug Trafficking; FDI; Corruption; Latin America;

    JEL classification:

    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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