Alberto Naranjo: Dept. of Economics, Stockholm University, Postal: Department of Economics, Stockholm University, S-106 91 Stockholm, Sweden
Abstract: U.S. strategy against the production and distribution of illegal drugs in and from source countries uses both supply and demand side anti-drug policies with the aim of increasing drug prices. In source countries, the trends for potential drug production (or area cultivated with coca and opium poppy leaves) and trafficking activities, together with wholesale prices for cocaine (and heroin) in the U.S, show no clear results supporting the success of the strategy. Moreover, the existence of these illegal industries has been an important factor in the development of rebel movements. This paper presents a possible explanation for the correlations between both anti-drug policies and these trends, by analyzing the illicit drug production and distribution together with the existence of rebel movements. By accounting for the interaction between a rebel movement, a drug lord, and a government, is possible to explain the effects of each of these two anti-drug policies, their relative effectiveness, and the reasons behind their use. The analysis suggests that demand oriented anti-drug policies can produce better results than supply oriented policies.
24 pages, August 23, 2004
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