A model of cocaine supply transformation and the efficiency of U.S. federal interdiction

Abstract

This paper develops a model to illustrate factors that may reduce cocaine supply from its original production level in South American countries to its arrival on U.S. streets for final retail sale. Some of the variables in the model must be estimated due to the inherent lack of data on illegal drug trade, while others such as seizure quantities are directly observable. Using data from four U.S. federal agencies and the annual potential production of cocaine as estimated by the United Nations, the agencies’ annual seizure rate is calculated at 26.4 percent of the world supply. However, the proposed model shows that this figure underestimates the actual seizure rate from the U.S. market as it does not account for variables that may reduce cocaine supply to the U.S. The paper suggests that the agencies on average seize more than 26.4 percent of the U.S. supply.