Housing Markets on Cocaine: Explaining the Relationship between Cocaine Exports and Local Housing Markets in the Andes

Ignacio Navarro

Journal of Housing Research, 2013, vol. 22, issue 1, 59-74

Abstract: This paper explores the effect of illegal good exports on urban housing markets. It argues that while exports of illegal goods affect housing markets through an employment multiplier effect just as legal exports do, they additionally tend to have an impact on housing markets through violence-generated labor displacement and money laundering. Empirical estimates using time series data from Bolivia and Colombia, two of the world's largest exporters of cocaine, demonstrate that cocaine exports in these countries tend to have a significant impact on urban home prices and construction permits that differ considerably from those of other legal exports. Further, the estimates indicate that only a small fraction of the total effects of illegal exports on housing markets is accounted for by employment effects, suggesting that illegal export effects on housing markets in Bolivia and Colombian during the time studied occurred mainly through money laundering.

Date: 2013
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DOI: 10.1080/10835547.2013.12092065

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