Coca-Based Local Growth and Its Socio-Economic Impact in Colombia

Lucas Marín Llanes, Manuel Fernandez Sierra, Maria Vélez, Eduard Martínez González () and Paulo Murillo Sandoval ()
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Eduard Martínez González: Superintendencia de Economía Solidaria
Paulo Murillo Sandoval: Universidad del Tolima

No 21186, Documentos CEDE from Universidad de los Andes, Facultad de Economía, CEDE

Abstract: This study investigates the socio-economic effects of Colombia’s recent coca cultivation boom, exploiting municipal variations in production incentives following the 2014 announcement of the coca crop substitution program. Using a difference-in-differences strategy with satellite-derived night-time light data as a proxy for economic activity, we find that a one standard deviation increase in coca crops resulted in a 2.5% to 3.1% increase in municipality-level GDP. We also estimate local GDP multipliers, showing that each additional dollar from coca leaf and coca base sales raises GDP by $1.17 to $2.30 and $0.86 to $1.63, respectively. Although the coca boom did not significantly affect local fiscal revenues, violence indicators, or land used for agricultural production, it had substantial environmental impacts, with deforestation rates increasing by 104% and a 302% rise in land conversion from coca cultivation to cattle pastures in the Colombian Amazon. Our findings underscore the significance of illicit economies in providing short-term economic gains and acting as catalysts for economic activity.

Keywords: Illicit Economies; Economic growth; Coca Cultivation; Deforestation; Colombia (search for similar items in EconPapers)
JEL-codes: K42 O13 O17 Q34 Q56 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2024-08-20
New Economics Papers: this item is included in nep-big, nep-dev, nep-lam and nep-law
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Persistent link: https://EconPapers.repec.org/RePEc:col:000089:021186

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