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Abstract: Colombia is the world’s major producer of coca leaves. The lack of profitable legal alternatives is often stated by farmers as one of the main reasons to grow this illicit crop. In this paper we identify coca cultivation's responsiveness to changes in the price of five of the most promising legal alternative crops – coffee, sugar, palm oil, cocoa, and banana. We do this using a rich, spatially very detailed dataset that contains yearly information on the amount of coca grown in each of over 31,000 villages (veredas) in Colombia over the period 2001-2018. For identification, we exploit exogenous variation in legal commodity prices, in combination with detailed information about the soil and climatic suitability of each vereda. We find a robust response of coca farming to changes in the price of coffee and banana: when prices of these crops go up (down), less (more) coca is found in veredas that are suitable for the production of these two crops. We discuss why we find this effect for these two crops only. Furthermore, we show that our findings are driven by veredas with better (road) access, closer to police stations, and those without good access to Colombia's waterways that are heavily used by coca(ine) traffickers.
It is joint work with Sophie de Vries Robbé.