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16:30 | Applied Micro Research Seminar
The University of Warwick, United Kingdom
Author: Rocco d’Este
Abstract: What is the impact of illegal drug use on crime? Research on this question has been hindered by the lack of a major exogenous ‘lever’ affecting drug consumption. I use the mid-2000’s U.S. crackdown on the Over-the-Counter (OTC) sale of pseudoephedrine-based medications to investigate the effect of crystal methamphetamine on crime. The domestic and localized nature of crystal meth production, performed synthesizing pseudoephedrine, enabled OTC restrictions to disrupt the clandestine economy built around the drug. To guide the empirical exercise, I model the choices of a heavy meth consumer at the margins of crime. I combine a rational addiction framework à la Becker-Murphy (1988) with Becker’s model of crime (1968). The positive price shock induced by the reform deters drug abuse, but discourages drug-motivated crime only for ‘sufficiently’ high prices. Several quasi-experimental designs, performed on a newly assembled DEA-FBI panel of U.S. counties, lend support to the model’s predictions. Crime fell by approximately 10 percent in areas adopting the policy. OTC restrictions cut heavy drug abuse, reducing acquisitive crimes undertaken to sustain the habit (economic channel), and violent crimes committed under the influence of the drug (psychological channel). Crucially, the analysis allows to parse out violence associated with illegal drug trafficking (systemic channel), from violence committed ‘under the influence’. A calculation based on the evidence of the paper, which consistently points to a 30-35 percent decline in meth usage, provides boundaries for the drug-crime elasticity in the range of 0.1 to 0.4.
