The Development Impact of the Illegality of Drug Trade

This paper reviews the unintended consequences of the war on drugs, particularly for developing countries, and weighs them against the evidence regarding the efficacy of prohibition to curb drug use and trade. It reviews the available evidence and presents new results that indicate that prohibition has limited effects on drug prevalence and prices, most likely indicating a combination of inelastic drug demand (due to its addictive properties) and elastic supply responses (due to black markets). This should turn the focus to the unintended consequences of drug prohibition. First, the large demand for drugs, particularly in developed countries, generates the possibility of massive profits to potential drug providers. This leads to the formation of organized crime groups, which use violence and corruption as their means of survival and expansion and which, in severe cases, challenge the state and seriously compromise public stability and safety. Second, prohibition and its derived illegal market impose greater costs on farmers than on drug traffickers. In many instances, this entails the transfer of wealth from poor peasants to rich (and ruthless) traders. Third, criminalization can exacerbate the net health effects of drug use. These consequences are so pernicious that they call for a fundamental review of drug policy around the world.

Bibliographic Details

Main Authors:	Keefer, Philip, Loayza, Norman V., Soares, Rodrigo R.
Format:	Policy Research Working Paper biblioteca
Language:	English
Published:	World Bank, Washington, DC 2008-02
Subjects:	ABUSES, ADDICTION, ADDICTIVE SUBSTANCES, ADVERSE SELECTION, ADVERTISING, AGED, AGGRESSIVE, ALCOHOL, ALCOHOL CONSUMPTION, AMBASSADOR, ARMED FORCES, ASSAULT, BARRIERS TO ENTRY, BLACK MARKETS, CAFFEINE, CANNABIS, CARTEL, CENTRAL AMERICA, CENTRAL ASIAN, COCAINE, COMPARATIVE ADVANTAGE, CONFLICT, CONFLICT PREVENTION, CONSTRAINT, CONSUMER PRICE, CONSUMER PRICE INDEX, CONSUMERS, CONSUMPTION INCREASES, CONTAGIOUS DISEASES, CONTAINMENT, CORRUPTION, CRACK, CRIME, CRIME RATES, CRIMES, CRIMINAL, CRIMINAL ACTIVITIES, CRIMINAL ACTIVITY, CRIMINAL BEHAVIOR, CRIMINAL JUSTICE, CRIMINAL JUSTICE SYSTEMS, CRIMINALITY, CRIMINALS, DAMAGES, DEATHS, DELINQUENCY, DEMAND ELASTICITY, DEMAND FUNCTION, DEMAND FUNCTIONS, DISTRIBUTION OF WEALTH, DRUG, DRUG ABUSE, DRUG CONSUMPTION, DRUG CONTROL PROGRAM, DRUG DEPENDENCY, DRUG SEIZURE, DRUG SEIZURES, DRUG TRADE, DRUG TRAFFICKERS, DRUG TRAFFICKING, DRUG USERS, DRUGS, ECONOMIC THEORIES, ECONOMIC THEORY, ECSTASY, ELASTICITY, ELASTICITY OF DEMAND, EMBASSY, EXPENDITURE, EXPENDITURES, EXPORTS, EXTERNALITY, FAMILIES, FINISHED PRODUCT, FOREIGN POLICY, FREE TRADE, GANG, GANGS, GDP, GDP PER CAPITA, GOVERNMENT REGULATION, GUERRILLA, GUERRILLAS, HARM REDUCTION, HEALTH EFFECTS, HEALTH SERVICES, HEROIN, HIGH CRIME, ILLICIT DRUG, ILLICIT DRUG TRADE, ILLICIT DRUGS, IMF, INCOME, INCOME EFFECTS, INELASTIC DEMAND, INTERMEDIARIES, INTERNATIONAL BANK, INTERNATIONAL SANCTIONS, INTERNATIONAL SECURITY, INTERVENTION, LATIN AMERICAN, LAW ENFORCEMENT, LAWLESSNESS, LAWS, LIFE EXPECTANCY, MACROECONOMICS, MARGINAL COSTS, MARIJUANA, MARKET FORCES, MARKET POWER, MARKET SHARE, MARKETING, MEMBER STATES, MENTAL HEALTH, MIDDLE EAST, MIDDLEMEN, MILITARY PERSONNEL, MONOPOLY, MORTALITY, MURDER, NARCOTIC, NARCOTIC DRUG, NARCOTIC DRUGS, NARCOTICS, NARCOTICS CONTROL, NATIONS, NEEDLE EXCHANGE, NEGATIVE EXTERNALITIES, OBSERVERS, OFFENDERS, OFFENSE, OFFENSES, OFFICIAL CORRUPTION, OPPORTUNITY COST, OPPORTUNITY COSTS, ORGANIZED CRIME, PATIENTS, PER CAPITA INCOME, PERSONALITY, POLICE, POLITICAL ECONOMY, PRICE CHANGE, PRICE CHANGES, PRICE ELASTICITY, PRICE INCREASES, PRICE STRUCTURE, PRISON, PRISONERS, PRISONS, PRODUCTION INPUTS, PROPERTY CRIME, PROPERTY CRIMES, PSYCHOTROPIC SUBSTANCES, PUBLIC HEALTH, PURCHASING, PURCHASING POWER, REAL GDP, RECONSTRUCTION, RETAIL, RETAIL PRICE, RETAIL PRICES, RETAILING, ROAD, SECURITY FORCES, SLUMS, SMOKING, SOCIAL DEVELOPMENT, SOCIAL NORMS, SOUTH AMERICA, SPREAD, SUBSTANCE ABUSE, SUBSTITUTE, SUBSTITUTES, SUPPLIER, SUPPLIERS, SUPPLY CHAIN, SUPPLY COSTS, SURPLUSES, TACTICS, TAXATION, TERRORISM, TOBACCO, TOBACCO CONSUMPTION, TOTAL COSTS, VIOLENCE, VIOLENT CRIME, WAR, WARS, WEALTH, WEAPONS, WELFARE ECONOMICS, WORLD DEVELOPMENT,
Online Access:	http://documents.worldbank.org/curated/en/2008/03/9584783/development-impact-illegality-drug-trade http://hdl.handle.net/10986/6871
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