Snow Job?

This dissertation presents a dynamic economic model of the cocaine industry and source country drug control policies. The model is used to assess the impact of eradication (voluntary and forced), interdiction, and development assistance on the production and export of cocaine from Bolivia, Colombia, and Peru. Most of the policies, with the exception of shock interdiction, can disrupt production for short (2-3 year) periods. However, even sustained levels of extreme policies (50% interdiction and eradication rates) fail to lead to permanent reductions in output. Policy cannot permanently reduce output because the cocaine industry is endowed with access to low-cost resources (land and labor), extreme mobility, and short recovery times between policy implementation and industry response. Over the short run, the lag between policy implementation and industry recovery can lead to temporary disruptions of cocaine output. Short-run disruption of cocaine production may be of utility because of its potential impact on initiation rates into cocaine use and, subsequently, on future cocaine consumption. However, short-run disruptions are relatively expensive in terms of budget costs and externalities such as increased political violence and dispersal of cocaine production. Factors such as inventory accumulation, risk-related wage premiums, uncertainty about industry lag times, and the form used to model demand for cocaine create uncertainty as to the length of the short-run disruption resulting from a given policy. Current levels of source country control programs are incapable of generating substantial disruptions, and thus the most compelling justifications for maintaining the current approach are found in the data source country policies generate about the international drug trade and the support source country control programs provide for foreign policy objectives in the region. It is unclear whether the benefits of expanded short-run disruptions outweigh the budget costs and externalities. Additionally, the prospects for integrating substantial short-run disruptions into the National Drug Control Strategy remain unclear. Thus, much research remains to be done before substantial changes in source country control programs can, or should, be enacted.