An Economic Analysis of a Drug-Selling Gang’s Finances

An Economic Analysis of a Drug-Selling Gang’s Finances

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by Steven D. Levitt , Sudhir Alladi Venkatesh , Ro Gaviria , Tim Groseclose , Nicholas Harney , Lewis Kornhasuer , Ron Nobles , David Rothman , Catherine Wolfram

Venue:	National Bureau of Economic Research Working Paper Series, Working Paper 6592
Citations:	16 - 3 self

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Datum	Value	Source
TITLE	An Economic Analysis of a Drug-Selling Gang’s Finances	INFERENCE
AUTHOR NAME	Steven D. Levitt	SVM HeaderParse 0.2
AUTHOR AFFIL	University of Chicago and American Bar Foundation; and	SVM HeaderParse 0.2
AUTHOR NAME	Sudhir Alladi Venkatesh	SVM HeaderParse 0.2
AUTHOR AFFIL	Harvard Society of Fellows	SVM HeaderParse 0.2
AUTHOR NAME	Ro Gaviria	SVM HeaderParse 0.2
AUTHOR AFFIL	as anonymous informants for providing access to some of the data. The National Science	SVM HeaderParse 0.2
AUTHOR NAME	Tim Groseclose	SVM HeaderParse 0.2
AUTHOR NAME	Nicholas Harney	SVM HeaderParse 0.2
AUTHOR NAME	Lewis Kornhasuer	SVM HeaderParse 0.2
AUTHOR NAME	Ron Nobles	SVM HeaderParse 0.2
AUTHOR NAME	David Rothman	SVM HeaderParse 0.2
AUTHOR NAME	Catherine Wolfram	SVM HeaderParse 0.2
AUTHOR AFFIL	Correspondence can be addressed to Steven Levitt, Department of Economics, University of	SVM HeaderParse 0.2
AUTHOR ADDR	Chicago, 1126 East 59th Street, Chicago. IL 60637, or to Sudhir Venkatesh, Harvard Society of; Fellows, 78 Mount Auburn Street, Cambridge, MA 02138. E-mail addresses:	SVM HeaderParse 0.2
ABSTRACT	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	SVM HeaderParse 0.2
VENUE	National Bureau of Economic Research Working Paper Series, Working Paper 6592	INFERENCE
VENUE TYPE	CONFERENCE	INFERENCE
CITATIONS	39 found	ParsCit 1.0