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UNU-WIDER Cocaine Cities

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A teenager wears torn rubber boots in a muddy local market in Bac Ha, Viet Nam. As of 2005 figures, half the world population—more than 3 billion people–is estimated to live on less than USD 2.50 a day. Bac Ha, Viet Nam. UN Photo/Kibae Park.

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WP/09 Cocaine Cities

The relationship between the cocaine trade and urban land markets in South America has been overlooked by the mainstream economics and urban studies literature. This paper examines two avenues through which the cocaine trade can have a large impact on urban development in producer countries: (i) through an employment multiplier effect similar to that of other legal exports, and (ii) through money laundering using urban real estate. We test our hypotheses using the Bolivian case and find that urban growth patterns are closely related to fluctuations in cocaine production. Further, even though our estimates suggest that the cocaine trade affects urban growth through the two avenues presented in the paper, we find that formal urban employment generated by the cocaine trade has a modest effect on urban growth and most of the effect seems to be explained by money laundering using real estate and other paths.
Publisher:
UNU-WIDER
Series:
WIDER Working Paper
Volume:
2011/09
Title:
WP/09 Cocaine Cities
Authors:
Ignacio A. Navarro
Publication date:
March 2011
ISBN 13 Web:
978-92-9230-372-3
Copyright holder:
© UNU-WIDER
Copyright year:
2011
Keywords:
cocaine trade, urban development, money laundering, Bolivia
JEL:
R11, R14, R31
Project:
Development in an Urban World
Sponsor:
UNU-WIDER gratefully acknowledges the financial contributions to the research programme by the governments of Denmark (Royal Ministry of Foreign Affairs), Finland (Ministry for Foreign Affairs), Sweden (Swedish International Development Cooperation Agency—Sida) and the United Kingdom (Department for International Development—DFID).
Format:
online

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