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Optimal Drug Policy in Low‐Income Neighborhoods
Author(s) -
CHANG SHENGWEN,
COULSON N. EDWARD,
WANG PING
Publication year - 2016
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/jpet.12147
Subject(s) - economics , variety (cybernetics) , drug , construct (python library) , population , supply side , aggregate demand , public economics , microeconomics , monetary economics , pharmacology , medicine , environmental health , artificial intelligence , computer science , programming language , monetary policy
The control of drug activity currently favors supply‐side policies: drug suppliers in the United States 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.