We analyze a unique data set detailing the financial activities of a drug-selling street gang on a monthly basis over a four-year period in the recent past. The data, originally compiled by the gang leader to aid in managing the organization, contain detailed information on both the sources of revenues (e.g. drug sales, extortion) and expenditures (e.g costs of drugs sold, weapons, tribute to the central gang organization, wages paid to various levels of the gang). Street-level drug dealing appears to be less lucrative than is generally thought. We estimate the average wage in the organization to rise from roughly $6 per hour to $11 per hour over the time period studied. The distribution of wages, however, is extremely skewed. Gang leaders earn far more than they could in the legitimate sector, but the actual street-level dealers appear to earn less than the minimum wage throughout most of our sample, in spite of the substantial risks associated with such activities (the annual violent death rate in our sample is 0.07). There is some evidence consistent both with compensating differentials and efficiency wages. The markup on drugs suggests that the gang has substantial local market power. Gang wars appear to have an important strategic component: violence on another gang’s turf shifts demand away from that area. The gang we observe responds to such attacks by pricing below marginal cost, suggesting

official position or policies of the U.S. Department of Justice. References to specific companies, products, or services should not be considered an endorsement by the author or the U.S. Department of Justice. Rather, the references are illustrations to supplement discussion of the issues. Letter from the Director The most successful and sustainable gang-prevention strategies include partnerships among law enforcement, schools, parents, the community, faith-based organizations, and youth. According to the National Youth Gang Center, “the most effective response to youth gangs is a combination of interdependent prevention, intervention, and suppression strategies, selected by a community to target its emerging or chronic gang problems, which have been identified by a comprehensive, systematic assessment. ” To assist law enforcement and their partners in identifying and addressing gang crime, the COPS Office has developed a variety of tools and resources including this guidebook, Strategies to Address Gang Crime: A Guidebook for Local Law Enforcement. Widely regarded in the field for his research on gang activity, author Dr. Scott H. Decker, Professor and Director of the School of Criminal Justice and Criminology at Arizona State University, offers sensible information for law enforcement to use in developing responses to their gang problem. A central premise of this guidebook is that gang problems are local and solutions must be based on improving understanding of the nature of those problems and the immediate underlying conditions that give rise to them. Dr. Decker provides practical guidance on using the SARA problem-solving