Umeå Economic Studies, Department of Economics, Umeå University
No 809:
Counterproductive counternarcotic strategies? A study of the effects of opium eradication in the presence of imperfect capital markets and sharecropping arrangements
Camilla Andersson ()
Abstract: In this paper, we model the economic incentives
surrounding opium crop production at farm level in Afghanistan.
Specifically, we examine the impact of eradication policies when opium is
used as a means of obtaining credit, and when the crops are produced in
sharecropping arrangements. The theoretical analysis suggests that when
perfect credit markets are available, an increased risk of having the opium
poppy eradicated will lead to less land being allocated to opium poppy.
Thus, with perfect credit markets, the eradication policy is likely to have
the intended effect of lowering opium crop production. However, when opium
is sold on futures markets as a means of obtaining credit, the effects of
opium eradication are no longer clear-cut: in some cases the outcome may
actually increase the land allocated to opium poppy. Finally, the results
indicate that when opium is produced in sharecropping arrangements,
increased risk of opium eradication will unambiguously make the tenants
worse off, while landlords may actually benefit.
Keywords: Opium; Eradication; Futures markets; Sharecropping; (follow links to similar papers)
JEL-Codes: Q12; (follow links to similar papers)
40 pages, May 19, 2010
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