Coca leaves production and eradication: a general equilibrium analysis

Abstract

Law enforcement against illegal drug markets like coca leaf production have created big debate about its consequences and effectiveness. Since this enfocerment does not only affect the illegal market but also the legal ones it is then necessary to study its effects and effectiveness within a general equilibrium framework. This is the first contribution of this note. Moreover, using a unique database on Colombia we make a robust econometric check for the main results: we show that standard erradication policy have counterintuitive effects and do not reduce the production.