The Relationship Between Illicit Coca Production and Formal Economic Activity in Peru

Author/Editor:

Peter L. Pedroni ; Concha Verdugo Yepes

Publication Date:

August 1, 2011

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper investigates the relationship between unrecorded economic activity associated with the production of illicit coca and formally recorded economic activity in Peru. It does so by attempting to construct new regional level estimates for coca production and by implementing recently developed panel time series methods that are robust to regional heterogeneity and unobserved regional inter-dependencies. The paper finds that on balance illicit coca production crowds out formal sector production at the regional level, regardless of whether unanticipated changes occur nationally or regionally. However, total output nevertheless increases, since formal sector production is crowded out less than one for one.

Series:

Working Paper No. 2011/182

Subject:

English

Publication Date:

August 1, 2011

ISBN/ISSN:

9781462310289/1018-5941

Stock No:

WPIEA2011182

Pages:

51

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