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The Effect of Cocaine Prices on Crime

  • Jeffrey DeSimone

The relationship between cocaine prices and crime has critical implications for U.S. drug policy, but is theoretically indeterminate because cocaine price changes affect crime through changes in both cocaine consumption and expenditures. This paper investigates this relationship in annual data from 1981-95 on 29 large U.S. cities, accounting for simultaneity by using two-stage least squares with measures of wholesale supply factors and retail enforcement intensity as instruments for cocaine prices. Controlling for prices of other drugs, deterrence, socioeconomic factors, and city and year-specific effects, a strong negative relationship exists between cocaine prices and six of seven FBI index crimes. Copyright 2001 by Oxford University Press.

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File URL: http://www.ecu.edu/econ/wp/99/ecu9907.pdf
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Paper provided by East Carolina University, Department of Economics in its series Working Papers with number 9907.

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Date of creation: Aug 1999
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Handle: RePEc:wop:eacaec:9907
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  1. Bruce L. Benson & David W. Rasmussen, 1991. "Relationship Between Illicit Drug Enforcement Policy And Property Crimes," Contemporary Economic Policy, Western Economic Association International, vol. 9(4), pages 106-115, October.
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  13. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
  14. Michael Grossman & Frank J. Chaloupka & Charles C. Brown, 1996. "The Demand for Cocaine by Young Adults: A Rational Addiction Approach," NBER Working Papers 5713, National Bureau of Economic Research, Inc.
  15. Ehrlich, Isaac, 1973. "Participation in Illegitimate Activities: A Theoretical and Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 521-65, May-June.
  16. Silverman, Lester P. & Spruill, Nancy L., 1977. "Urban crime and the price of heroin," Journal of Urban Economics, Elsevier, vol. 4(1), pages 80-103, January.
  17. Lott, John R, Jr & Mustard, David B, 1997. "Crime, Deterrence, and Right-to-Carry Concealed Handguns," The Journal of Legal Studies, University of Chicago Press, vol. 26(1), pages 1-68, January.
  18. Mast, Brent D & Benson, Bruce L & Rasmussen, David W, 2000. "Entrepreneurial Police and Drug Enforcement Policy," Public Choice, Springer, vol. 104(3-4), pages 285-308, September.
  19. Miron, Jeffrey A., 1992. "Economists and drug policy : A comment," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 36(1), pages 249-259, July.
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