Journal of Public Economics.
Joint with Daniel Mejia.
We study the distorting effect that property crime has on consumption decisions. Using an incomplete information model, we argue that consuming conspicuous goods reveals information to criminals who are seeking bountiful victims. For any given individual this information increases the likelihood of being victimized. Consequently, property crime reduces the consumption of visible goods even in the case of goods that cannot be stolen but that nonetheless carry information about a potential victim’s wealth. To test this mechanism we exploit the large decline in property crime in the U.S. during the 90s. Analysis of 1986 to 2003 data in the U.S. Consumer Expenditure Survey reveals that households located in states that experienced sharper than average reductions in property crime significantly increased their consumption of visible goods that are not generally stolen. Our findings hold when we instrument the decline in property crime during the 90s using a variety of strategies.
Forthcoming, Journal of Economic Behavior and Organizations.
Joint with Daniel Mejia.
We model the war on drugs in source countries as a conflict over scarce inputs in successive levels of the production and trafficking chain, and we examine how policies aimed at different stages affect prices and quantities in upstream and downstream markets. Using the model we study Plan Colombia; a large intervention that aims to reduce the downstream supply of cocaine by targeting illicit crops and blocking the transport of cocaine outside this source country. The model fits the main patterns found in the data, including the displacement of the drug trade to other source countries, the increase in the productivity of coca crops as a response to eradication, and the lack of apparent effects in consumer markets. We use a reasonable parametrization of our model to evaluate the cost-effectiveness of several policies implemented under Plan Colombia. We find that the marginal cost to the U.S. of reducing cocaine transacted in retail markets by one kilogram is $940,000 if it subsidizes eradication efforts and $175,000 if it subsidizes interdiction efforts in Colombia.
World Bank Economic Review.
Joint with Daniel Mejia and Sandra Rozo.
This paper examines the effects of enforcement on illegal behavior through a study of a large aerial spraying program designed to curb coca cultivation in Colombia. In 2006, the Colombian government pledged not to spray a 10 km band around the frontier with Ecuador because of diplomatic frictions that arose from concerns about the program’s possible negative collateral effects on the Ecuadorian side of the border. We exploit this variation to estimate the effect of spraying on coca cultivation by regression discontinuity around the 10 km threshold and by conditional differences in differences. Spraying one additional hectare reduces coca cultivation by 0.022 to 0.03 hectares. We conclude that, given these small effects, aerial spraying is not a cost-effective method of reducing cocaine production in Colombia.
Handbook of Income Distribution.
Joint with Daron Acemoglu, James Robinson and Suresh Naidu.
This study revisits the relationship between democracy, redistribution, and inequality. We first review the theoretical reasons which suggest that democracy increases redistribution and reduce inequality. This prediction may fail to be realized when democracy is captured by the richer segments of the population; when democracy caters to the preferences of the middle class; or when democracy opens up disequalizing opportunities to segments of the population previously excluded from such activities, thus exacerbating inequality among a large part of the population. We then survey the existing voluminous empirical literature, which is full of contradictory results. We provide new and systematic reduced-form evidence of the dynamic impact of democracy on various outcomes, and we propose several conclusions. First, democracy has a significant and robust effect on tax revenues as a fraction of GDP, but it does not robustly impact inequality. Second, democracy is associated with an increase in secondary schooling and a more rapid transformation from agricultural to urban societies. Third, inequality tends to increase after democratization in more urban societies, when land inequality is high, and when the middle class have a similar income than the poor. These conclusions differ from those provided by the traditional median voter model of democratic redistribution. Democracy does not lead to a uniform decline in post-tax inequality, but it can produce changes in fiscal redistribution and economic structure that have ambiguous effects on inequality.