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Estimating the International Cocaine Market: A Novel Combination of Excess Compensation and Stochastic Frontier Analysis

Author

Listed:
  • Le Ba Tam

    (Ho Chi Minh National Academy of Politics, Hanoi, Vietnam)

  • Mai Xuan Thi Thanh

    (VNU University of Economics and Business, Hanoi, Vietnam)

  • Ngo Thanh

    (VNU University of Economics and Business, Hanoi, Vietnam)

  • Le Tu D. Q.

    (Vietnam National University, University of Economics and Law, Ho Chi Minh City, Vietnam)

Abstract

Although there are different ways to estimate the value of the illicit drug markets, the main issue remains that one cannot estimate the unseized or floating value of drugs at the country- and international-level markets. This study applies a novel estimation method that combines excess compensation estimation (from the financial field) and stochastic frontier analysis (from the operations research field) to estimate the value of the international cocaine market in 2019. Our estimations show that in 2019, the unseized market accounted for 32.16 % of the total market of cocaine and was smaller than the ratio of 48 % in 2007, indicating that the effectiveness of countries in disrupting the illicit cocaine market has improved. More importantly, we show that improvement in dealing with money laundering risks could also help reduce the illicit market of cocaine since illicit cocaine/drug proceeds must be laundered before they can be used by criminal organisations.

Suggested Citation

  • Le Ba Tam & Mai Xuan Thi Thanh & Ngo Thanh & Le Tu D. Q., 2024. "Estimating the International Cocaine Market: A Novel Combination of Excess Compensation and Stochastic Frontier Analysis," Asian Journal of Law and Economics, De Gruyter, vol. 15(3), pages 411-431.
    • Handle: RePEc:bpj:ajlecn:v:15:y:2024:i:3:p:411-431:n:1003
    DOI: 10.1515/ajle-2023-0129
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    More about this item

    Keywords

    illicit cocaine market; stochastic frontier analysis; excess compensation; money laundering;
    All these keywords.

    JEL classification:

    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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