Essays on the Economics of Drug Abuse, Criminal Activity, and Enforcement

This dissertation consists of three studies on the economics of drug abuse, criminal activity, and enforcement. The first essay seeks to understand the impacts of enforcement actions taken against doctors on the supply of prescription opioids, black-market prices, and health outcomes. Exploiting plausibly exogenous variation in the timing and location of controlled substance license audits, I find that cracking down on a single doctor decreases county-level opioid dispensing by 10\%. This decline in legal supply persists across space and time and results in a 44\% increase in the black-market pill price. Significant heroin substitution also occurs, yet for each additional heroin overdose death, there are two fewer non-heroin opioid overdose deaths. The mortality declines are strongest among young and prime-aged men. These results highlight a novel tradeoff policymakers should consider when attempting to address drug abuse through targeted supply-side enforcement: reductions in the flow of new users must be balanced against the harm that arises when existing users substitute to more dangerous drugs.

The second chapter provides evidence on the incentives of police. More specifically, using geocoded crime data and a novel source of within-city variation in punishment severity, I am able to shed light on enforcement behavior. I find that in parts of a city where drug sale penalties were weakened, there is a 13\% decrease in drug arrests within a year; there is no displacement of non-drug offenses and majority black neighborhoods have a larger decline in drug arrests. If offenders were significantly deterred by harsher penalties, as the law intended and standard models of criminal behavior predict, there should have been an increase in drug sale arrests. My results are therefore consistent with police treating enforcement effort and punishment severity as complementary. I also find that city-wide crime and drug use do not increase following the weakening of drug sale penalties. Taken together, my results call into question the ``War on Drugs'' view of punishment and suggest that certain types enforcement can be reduced without incurring large public safety costs.

The third chapter investigates how rebel groups choose between funding strategies using a unique panel dataset on the activities of 297 groups. I find that when the world price of a natural resource they exploit rises, rebel groups substitute away from extortion, smuggling, kidnapping, and theft. These results suggest that policies attempting to shut down these groups by cutting their main sources of funding may produce harmful unintended consequences in the short run.