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The economics of the war on illegal drug production and trafficking

Daniel Mejia () and Pascual Restrepo ()

Journal of Economic Behavior & Organization, 2016, vol. 126, issue PA, 255-275

Abstract: We model the war on drugs in source countries as a conflict over scarce inputs in successive levels of the production and trafficking chain, and study how policies aimed at different stages affect prices and quantities in upstream and downstream markets. We use the model to study Plan Colombia, a large intervention aimed at reducing the downstream supply of cocaine by targeting illicit crops and blocking the transport of cocaine outside this source country. The model fits the main patterns found in the data, including the displacement of the drug trade to other source countries, the increase in coca crops’ productivity as a response to eradication, and the lack of apparent effects in consumer markets. We use a reasonable parametrization of our model to evaluate the cost-effectiveness of different policies implemented under Plan Colombia. We find that the marginal cost to the U.S. of reducing cocaine transacted in retail markets by one kilogram is $940,000, if it subsidizes eradication efforts; and $175,000, if it subsidizes interdiction efforts in Colombia.

Keywords: Hard drugs; Conflict; War on drugs; Plan Colombia (search for similar items in EconPapers)
JEL-codes: D74 K42 (search for similar items in EconPapers)
Date: 2016
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Working Paper: The Economics of the War on Illegal Drug Production and Trafficking (2013) Downloads
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DOI: 10.1016/j.jebo.2015.11.003

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Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

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