TY - JOUR
T1 - ECONOMIC WELFARE ANALYSIS OF THE LEGALIZATION OF DRUGS
T2 - A CGE MICROSIMULATION MODEL FOR COLOMBIA
AU - Atuesta, Laura
AU - Hewings, Geoffrey J.D.
PY - 2013/6
Y1 - 2013/6
N2 - In this paper, a computable general equilibrium (CGE) microsimulation model is used to analyze the effects of an ex ante legalization of drugs on the Colombian economy. The model consists of 11 productive sectors, 3 different labor force categories with unemployment, and 20 households divided by income and location. Changes in wages and migration are estimated using a labor participation model, and a NIDS estimates the demands of the households. Changes in household economic welfare, measured by changes in income and prices (CV and EV measurements), are very sensitive to the reinvestments that the government makes in the economy. By analyzing six different scenarios with different assumptions about changes in drug prices, investments of the government, and the termination of the armed conflict, the results suggest that economic welfare improves when the government reinvests military expenditures in other productive sectors or when the 'economy of war' continues and the legalization does not end the armed conflict.
AB - In this paper, a computable general equilibrium (CGE) microsimulation model is used to analyze the effects of an ex ante legalization of drugs on the Colombian economy. The model consists of 11 productive sectors, 3 different labor force categories with unemployment, and 20 households divided by income and location. Changes in wages and migration are estimated using a labor participation model, and a NIDS estimates the demands of the households. Changes in household economic welfare, measured by changes in income and prices (CV and EV measurements), are very sensitive to the reinvestments that the government makes in the economy. By analyzing six different scenarios with different assumptions about changes in drug prices, investments of the government, and the termination of the armed conflict, the results suggest that economic welfare improves when the government reinvests military expenditures in other productive sectors or when the 'economy of war' continues and the legalization does not end the armed conflict.
KW - CGE microsimulation models
KW - Drug legalization
KW - Economic welfare analysis
KW - Rural-urban migration
UR - http://www.scopus.com/inward/record.url?scp=84878524160&partnerID=8YFLogxK
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U2 - 10.1080/09535314.2012.728130
DO - 10.1080/09535314.2012.728130
M3 - Article
AN - SCOPUS:84878524160
SN - 0953-5314
VL - 25
SP - 190
EP - 211
JO - Economic Systems Research
JF - Economic Systems Research
IS - 2
ER -