Evo, Pablo, Tony, Diego, and Sonny : General Equilibrium Analysis of the Market for Illegal Drugs

Evo, Pablo, Tony, Diego, and Sonny : General Equilibrium Analysis of the Market for Illegal Drugs

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 us...

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Bibliographic Details
Main Author: Chumacero, Rómulo A.
Format: Policy Research Working Paper
Language:English
Published: World Bank, Washington, DC 2012
Subjects:
ANNUAL GROWTH
CD
COMPETITIVE EQUILIBRIUM
CONSUMER PRICE
CONSUMERS
CONSUMPTION GOOD
CRRA
DEPRECIATION
DEPRECIATION RATE
ECONOMETRIC MODELS
ECONOMIC PERSPECTIVES
ECONOMIC RESEARCH
ECONOMIC THEORY
EQUILIBRIUM
EQUILIBRIUM CONDITIONS
EXPENDITURE
FUNCTIONAL FORMS
GENERAL EQUILIBRIUM
GENERAL EQUILIBRIUM ANALYSIS
GENERAL EQUILIBRIUM MODEL
GENERAL EQUILIBRIUM MODELS
GOVERNMENT EXPENDITURES
GROWTH RATE
IMPERFECT COMPETITION
INCOME EFFECT
INTERNATIONAL BANK
MACROECONOMICS
MARGINAL COST
NEGATIVE SUPPLY SHOCK
OPTIMAL ALLOCATIONS
OPTIMIZATION
PERFECT COMPETITION
POLITICAL ECONOMY
PRICE INCREASES
PRIVATE CONSUMPTION
PRODUCTION FUNCTION
PRODUCTION FUNCTIONS
RELATIVE PRICE
RELATIVE PRICES
REPRESENTATIVE AGENT
RISK AVERSION
RISK FACTORS
SALE
SEIZURES
SIDE EFFECTS
STEADY STATE
SUBSTITUTE
SUPPLY RESPONSE
SUPPLY SHOCK
SUPPLY SIDE
TAX
TAX RATE
UNCERTAINTY
UTILITY FUNCTION
UTILITY FUNCTIONS
Online Access:http://documents.worldbank.org/curated/en/2008/03/9323848/evo-pablo-tony-diego-sonny-general-equilibrium-analysis-illegal-drugs-market
http://hdl.handle.net/10986/6525
Description
Summary: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.

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