Optimal Drug Policy in Low-Income Neighborhoods.
The control of drug activity currently favors supply-side policies: drug suppliers in the U.S. face a higher arrest rate and longer sentences than demanders. We construct a simple model of drug activity with search and entry frictions in labor and drug markets. Our calibration analysis suggests a strong "dealer replacement effect." As a result, given a variety of community objectives, it is beneficial to lower supplier arrests and raise the demand arrest rate from current values. A 10% shift from supply-side to demand-side arrests can reduce the population of potential drug dealers by 22-25,000 and raise aggregate local income by $380-400 million, at 2002 prices. (JEL Classification: D60, J60, K42, H70).
National Chengchi University.
Sheng-Wen
SW
Chang
UNLV.
N Edward
NE
Coulson
Washington University in St. Louis and NBER.
Ping
P
Wang
Demand versus Supply-Side Drug Policies; Occupational Choice; Search and Entry Frictions