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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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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. 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.
  2. Niskanen, William A., 1992. "Economists and drug policy," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 36(1), pages 223-248, July.
  3. Caulkins Jonathan P., 1995. "Domestic Geographic Variation in Illicit Drug Prices," Journal of Urban Economics, Elsevier, vol. 37(1), pages 38-56, January.
  4. Jeff Grogger & Mike Willis, 1998. "The Introduction of Crack Cocaine and the Rise in Urban Crime Rates," NBER Working Papers 6353, National Bureau of Economic Research, Inc.
  5. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169.
  6. Saffer, Henry & Chaloupka, Frank, 1999. "The Demand for Illicit Drugs," Economic Inquiry, Western Economic Association International, vol. 37(3), pages 401-11, July.
  7. Jeffrey DeSimone, 1999. "Illegal Drug Use and Labor Supply," Working Papers 9906, East Carolina University, Department of Economics.
  8. 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.
  9. J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers 185, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. Frank J. Chaloupka & Michael Grossman & John A. Tauras, 1998. "The Demand for Cocaine and Marijuana by Youth," NBER Working Papers 6411, National Bureau of Economic Research, Inc.
    • 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.
  11. White, Michael D & Luksetich, William A, 1983. "Heroin: Price Elasticity and Enforcement Strategies," Economic Inquiry, Western Economic Association International, vol. 21(4), pages 557-64, October.
  12. 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.
  13. 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.
  14. 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.
  15. 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.
  16. 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.
  17. Levitt, Steven D, 1997. "Using Electoral Cycles in Police Hiring to Estimate the Effect of Police on Crime," American Economic Review, American Economic Association, vol. 87(3), pages 270-90, June.
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