THE BLACK MARKET FOR ILLICIT DRUGS: EXPLORING THE IMPACT OF U.S. FOREIGN AID ON ILLICIT DRUG SEIZURE RATES AROUND THE GLOBE

Abstract

The illegal drug market is estimated to be a multi-billion dollar industry that has continued to thrive despite countless government efforts to eliminate it. The United States has poured billions of dollars into supply-side efforts via the international `war on drugs', yet recent research suggests that much uncertainty remains surrounding the efficacy and efficiency of such programs. This paper explores the impact of more recent efforts to supplement traditional, punitive supply-side efforts with foreign aid. Using three years of panel data for 168 countries, I employ a panel fixed effects model with Driscoll-Kraay standard errors to measure the effect of U.S. foreign aid on illicit drug seizure rates, a common proxy for drug availability. Consistent with previous research I find that increases in foreign aid reduce drug availability by small amounts, suggesting low efficiency and effectiveness.