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The economics of the illicit drugs-for-guns trade and growth

King Yoong Lim and Diego Morris

Economic Modelling, 2020, vol. 91, issue C, 218-232

Abstract: Ever since US president Richard Nixon declared a war on drugs in 1971, different drug control policies have been implemented in both consumer and producer countries. These include policies ranging from crop eradication to an interdiction of drug shipments to outright legalization of drug possession. In this paper we develop a novel endogenous growth framework that unifies international trade, drugs control and accounts for consumers’ rational addiction and optimizing choice of drug consumption. Our results emphatically show that a one size-fits-all approach to drug control is ineffective. We show that there exists a production - consumption growth trade-off around the policy priority not previously documented in the literature. Moreover, we show that in the absence of a fundamental change to drug demand, drug control policies are unlikely to reduce illicit trades for drugs and guns in the long run.

Keywords: Central America; Economic growth; Drugs; Illicit trade; Organized crime (search for similar items in EconPapers)
JEL-codes: E26 F59 O41 O54 (search for similar items in EconPapers)
Date: 2020
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Working Paper: Modeling the drugs and guns trade in a two-country model with endogenous growth (2019) Downloads
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DOI: 10.1016/j.econmod.2020.05.014

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