Illegal Drugs and Public Corruption: Crack Based Evidence from California

Do illegal drugs foster public corruption? To estimate the causal effect of drugs on public
corruption in California, we adopt the synthetic control method and exploit the fact that
crack cocaine markets emerged asynchronously across the United States. We focus on
California because crack arrived here in 1981, before reaching any other state. Our
results show that public corruption more than tripled in California in the first three years
following the arrival of crack cocaine. We argue that this resulted from the particular
characteristics of illegal drugs: a large trade-off between profits and law enforcement,
due to a cheap technology and rigid demand. Such a trade-off fosters a convergence of
interests between criminals and corrupted public officials resulting in a positive causal
impact of illegal drugs on corruption.