The Illegal Drug Industry, Violence and the Colombian Economy: A Department Level Analysis

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Previous research on the Colombian illegal drug trade, which is generally qualitative in approach and focused on the national level, has concluded that the drug industry harms the economy. In order to test out this widespread claim, this article seeks to differentiate between the corrosive economic effects of Colombia's persistently high levels of generalised political violence and the specific consequences of the cocaine trade. It combines historical national level analysis with quantitative department analysis and identifies the economic effects of both paramilitary and guerrilla violence, thereby contributing to a closer examination of the impact of the drugs trade on the economy. The results reveal that paramilitary violence is related positively to exports but negatively to gross domestic product. Guerrilla violence, however, appears to harm exports but, surprisingly, not gross domestic product. Contrary to the conventional wisdom, coca cultivation does not have independent effects on exports or GDP, a conclusion which suggests that Colombia's economic problems stem more from political violence than from the drug trade in itself.