Friday, September 14, 2018
Alessandro Flamini, Babak Jahanshahi and Kamiar Mohaddes (University of Pavia, University of Edinburgh - School of Law and University of Cambridge - Faculty of Economics and Politics) have posted Illegal Drugs and Public Corruption: Crack Based Evidence from California (CAMA Working Paper No. 39/2018) on SSRN. Here is the 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.