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

Author/Editor: Peter L. Pedroni ; ConcepciĆ³n Verdugo Yepes
Publication Date: August 01, 2011
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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. 11/182
Subject(s): Latin America | Agricultural commodities | Agricultural production | Economic growth | Regional shocks | Shadow economy

Author's Keyword(s): Latin America | Peru | drugs | economic impact | regional economics.
Publication Date: August 01, 2011
ISBN/ISSN: 9781462310289/1018-5941 Format: Paper
Stock No: WPIEA2011182 Pages: 51
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