This paper presents a general equilibrium model for the production, trafficking, and consumption of illegal drugs which endogenously determines relative prices and quantities. The model is calibrated to characterize the market for cocaine and is used to analyze the effects of three types of policies: making the illegal activities riskier, increasing the penalties for conducting illegal activities, and legalizing previously illegal activities. Assessing the effects of these policies using the powerful tool of a general equilibrium model provides illuminating (and in cases surprising) results.
Details
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Author
Chumacero, Romulo A.
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Document Date
2008/03/01
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Document Type
Policy Research Working Paper
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Report Number
WPS4565
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Volume No
1
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Total Volume(s)
1
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Country
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Region
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Disclosure Date
2010/07/01
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Disclosure Status
Disclosed
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Doc Name
Evo, Pablo, Tony, Diego, and Sonny - general equilibrium analysis of the illegal drugs market
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Keywords
general equilibrium analysis;illegal drug;level of government expenditure;optimal allocation of resources;illegal activities;consumption;general equilibrium model;relative price;illegal crop;partial equilibrium model;consumption tax;change of expenditure;negative demand shock;negative supply shock;parameter value;law enforcement official;effect of price;department of economics;income due;crime and violence;department of justice;availability of information;source of revenue;development research group;share of labor;terms of trade;general equilibrium approach;production function;domestic law;drug traffic;drug producers;crop production;
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Citation
Chumacero, Romulo A.
Evo, Pablo, Tony, Diego, and Sonny - general equilibrium analysis of the illegal drugs market (English). Policy Research working paper ; no. WPS 4565 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/450691468314983460/Evo-Pablo-Tony-Diego-and-Sonny-general-equilibrium-analysis-of-the-illegal-drugs-market