IDEAS home Printed from https://ideas.repec.org/p/cam/camdae/1847.html
   My bibliography  Save this paper

Illegal Drugs and Public Corruption: Crack Based Evidence from California

Author

Listed:
  • Flamini, A.
  • Jahanshahi, B.
  • Mohaddes, K.

Abstract

Do illegal drugs foster public corruption? To estimate the causal effect of drugs on public corruption in California, we adopt the synthetic control method and exploit the fact that crack cocaine markets emerged asynchronously across the United States. We focus on California because crack arrived here in 1981, before reaching any other state. Our results show that public corruption more than tripled in California in the first three years following the arrival of crack cocaine. We argue that this resulted from the particular characteristics of illegal drugs: a large trade-off between profits and law enforcement, due to a cheap technology and rigid demand. Such a trade-off fosters a convergence of interests between criminals and corrupted public officials resulting in a positive causal impact of illegal drugs on corruption.

Suggested Citation

  • Flamini, A. & Jahanshahi, B. & Mohaddes, K., 2018. "Illegal Drugs and Public Corruption: Crack Based Evidence from California," Cambridge Working Papers in Economics 1847, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:1847
    Note: km418
    as

    Download full text from publisher

    File URL: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe1847.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. repec:hal:spmain:info:hdl:2441/4tc33icveb94nokk2rd2ettg0k is not listed on IDEAS
    2. William N. Evans & Craig Garthwaite & Timothy J. Moore, 2016. "The White/Black Educational Gap, Stalled Progress, and the Long-Term Consequences of the Emergence of Crack Cocaine Markets," The Review of Economics and Statistics, MIT Press, vol. 98(5), pages 832-847, December.
    3. repec:bla:ecinqu:v:51:y:2013:i:3:p:1651-1681 is not listed on IDEAS
    4. Alberto Abadie & Javier Gardeazabal, 2003. "The Economic Costs of Conflict: A Case Study of the Basque Country," American Economic Review, American Economic Association, vol. 93(1), pages 113-132, March.
    5. Glaeser, Edward L. & Saks, Raven E., 2006. "Corruption in America," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1053-1072, August.
    6. Filipe R. Campante & Quoc-Anh Do, 2014. "Isolated Capital Cities, Accountability, and Corruption: Evidence from US States," American Economic Review, American Economic Association, vol. 104(8), pages 2456-2481, August.
    7. Andreas Billmeier & Tommaso Nannicini, 2013. "Assessing Economic Liberalization Episodes: A Synthetic Control Approach," The Review of Economics and Statistics, MIT Press, vol. 95(3), pages 983-1001, July.
    8. Steven D. Levitt & Sudhir Alladi Venkatesh, 2000. "An Economic Analysis of a Drug-Selling Gang's Finances," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(3), pages 755-789.
    9. Carter, David L., 1990. "Drug-related corruption of police officers: A contemporary typology," Journal of Criminal Justice, Elsevier, vol. 18(2), pages 85-98.
    10. Susan Athey & Guido W. Imbens, 2017. "The State of Applied Econometrics: Causality and Policy Evaluation," Journal of Economic Perspectives, American Economic Association, vol. 31(2), pages 3-32, Spring.
    11. Timothy Besley & Robin Burgess, 2004. "Can Labor Regulation Hinder Economic Performance? Evidence from India," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 91-134.
    12. Eduardo Cavallo & Sebastian Galiani & Ilan Noy & Juan Pantano, 2013. "Catastrophic Natural Disasters and Economic Growth," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1549-1561, December.
    13. Del Monte, Alfredo & Papagni, Erasmo, 2001. "Public expenditure, corruption, and economic growth: the case of Italy," European Journal of Political Economy, Elsevier, vol. 17(1), pages 1-16, March.
    14. James E. Alt & David Dreyer Lassen, 2003. "The Political Economy of Institutions and Corruption in American States," Journal of Theoretical Politics, , vol. 15(3), pages 341-365, July.
    15. Abadie, Alberto & Diamond, Alexis & Hainmueller, Jens, 2010. "Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California’s Tobacco Control Program," Journal of the American Statistical Association, American Statistical Association, vol. 105(490), pages 493-505.
    16. Alberto Abadie & Alexis Diamond & Jens Hainmueller, 2015. "Comparative Politics and the Synthetic Control Method," American Journal of Political Science, John Wiley & Sons, vol. 59(2), pages 495-510, February.
    17. repec:hal:spmain:info:hdl:2441/nhjqqngq98lnqqrct2aj93qja is not listed on IDEAS
    18. Justin Wolfers, 2006. "Did Unilateral Divorce Laws Raise Divorce Rates? A Reconciliation and New Results," American Economic Review, American Economic Association, vol. 96(5), pages 1802-1820, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Caglayan, Mustafa & Flamini, Alessandro & Jahanshahi, Babak, 2021. "Hindering human capital accumulation: A hidden cost of the silent mafia?," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 828-845.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bruno Ferman & Cristine Pinto & Vitor Possebom, 2020. "Cherry Picking with Synthetic Controls," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 39(2), pages 510-532, March.
    2. Samer Matta & Michael Bleaney & Simon Appleton, 2022. "The economic impact of political instability and mass civil protest," Economics and Politics, Wiley Blackwell, vol. 34(1), pages 253-270, March.
    3. Irene Botosaru & Bruno Ferman, 2019. "On the role of covariates in the synthetic control method," The Econometrics Journal, Royal Economic Society, vol. 22(2), pages 117-130.
    4. Essers, Dennis & Ide, Stefaan, 2019. "The IMF and precautionary lending: An empirical evaluation of the selectivity and effectiveness of the Flexible Credit Line," Journal of International Money and Finance, Elsevier, vol. 92(C), pages 25-61.
    5. Esteban Colla‐De‐Robertis & Rafael Garduno Rivera, 2021. "The effect of a free trade agreement with the United States on member countries' per capita GDP: A synthetic control analysis," Regional Science Policy & Practice, Wiley Blackwell, vol. 13(4), pages 1129-1145, August.
    6. McCloud, Nadine, 2022. "Does domestic investment respond to inflation targeting? A synthetic control investigation," International Economics, Elsevier, vol. 169(C), pages 98-134.
    7. Samuel Verevis & Murat Üngör, 2021. "What has New Zealand gained from The FTA with China?: Two counterfactual analyses†," Scottish Journal of Political Economy, Scottish Economic Society, vol. 68(1), pages 20-50, February.
    8. Bibek Adhikari & Romain Duval & Bingjie Hu & Prakash Loungani, 2018. "Can Reform Waves Turn the Tide? Some Case Studies using the Synthetic Control Method," Open Economies Review, Springer, vol. 29(4), pages 879-910, September.
    9. Dennis Essers & Stefaan Ide, 2017. "The IMF and precautionary lending : An empirical evaluation of the selectivity and effectiveness of the flexible credit line," Working Paper Research 323, National Bank of Belgium.
    10. Giulio Grossi & Marco Mariani & Alessandra Mattei & Patrizia Lattarulo & Ozge Oner, 2020. "Direct and spillover effects of a new tramway line on the commercial vitality of peripheral streets. A synthetic-control approach," Papers 2004.05027, arXiv.org, revised Nov 2023.
    11. Diego D'iaz & Pablo Paniagua & Cristi'an Larroulet, 2024. "Earthquakes and the wealth of nations: The cases of Chile and New Zealand," Papers 2405.12041, arXiv.org.
    12. David Gilchrist & Thomas Emery & Nuno Garoupa & Rok Spruk, 2023. "Synthetic Control Method: A tool for comparative case studies in economic history," Journal of Economic Surveys, Wiley Blackwell, vol. 37(2), pages 409-445, April.
    13. Kaul, Ashok & Klößner, Stefan & Pfeifer, Gregor & Schieler, Manuel, 2015. "Synthetic Control Methods: Never Use All Pre-Intervention Outcomes Together With Covariates," MPRA Paper 83790, University Library of Munich, Germany.
    14. Nadine McCloud & Ajornie Taylor, 2022. "Does inflation targeting matter for international trade? A synthetic control analysis," Empirical Economics, Springer, vol. 63(5), pages 2427-2478, November.
    15. Daniel Albalate & Germà Bel & Ferran A. Mazaira-Font, 2021. "Decoupling synthetic control methods to ensure stability, accuracy and meaningfulness," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 12(4), pages 549-584, December.
    16. Zheng, Shanshan & Wang, Derek D., 2024. "The local economic impacts of mega nuclear accident: A synthetic control analysis of Fukushima," Economic Modelling, Elsevier, vol. 136(C).
    17. Maximiliano Marzetti & Rok Spruk, 2023. "Long-Term Economic Effects of Populist Legal Reforms: Evidence from Argentina," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 65(1), pages 60-95, March.
    18. Pekka Malo & Juha Eskelinen & Xun Zhou & Timo Kuosmanen, 2024. "Computing Synthetic Controls Using Bilevel Optimization," Computational Economics, Springer;Society for Computational Economics, vol. 64(2), pages 1113-1136, August.
    19. Michael Funke & Kadri Männasoo & Helery Tasane, 2023. "Regional Economic Impacts of the Øresund Cross-Border Fixed Link: Cui Bono?," CESifo Working Paper Series 10557, CESifo.
    20. Barseghyan, Gayane, 2019. "Sanctions and counter-sanctions : What did they do?," BOFIT Discussion Papers 24/2019, Bank of Finland, Institute for Economies in Transition.

    More about this item

    Keywords

    Public corruption; crack cocaine; synthetic control; illegal drugs; and law enforcement;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cam:camdae:1847. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jake Dyer (email available below). General contact details of provider: https://www.econ.cam.ac.uk/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.