Jul 12, 2014

The Market for Mules: Risk and Compensation of Cross-Border Drug Couriers

This is a very interesting paper on the market for mules. The full title is: "The Market for Mules: Risk and Compensation of Cross-Border Drug Couriers," and it will make a nice reading in a microeconomics class. The abstract:
This paper uses a unique dataset to examine the economics of cross-border drug smuggling. Our results reveal that loads are generally quite large (median 30 kg), but with substantial variance within and across drug types. Males and females, as well as U.S. citizens and non-U.S. citizens are all well represented among mules. We also find that mule compensation is substantial (median $1,313), and varies with load characteristics. Specifically, for mules caught with cocaine and meth, pay appears to be strongly correlated to expected sentence if caught, while pay appears to be primarily correlated with load size for marijuana mules, who generally smuggle much larger loads than those smuggling cocaine and meth. We argue that our results suggest that this underground labor market generally acts like a competitive labor market, where a risk-sensitive, reasonably well-informed, and relatively elastic labor force is compensated for higher risk tasks.
The authors add in the conclusions
This is somewhat in contrast to Levitt and Venkatesh's (2000) study of the finances of a Chicago street gang, who found that low level drug dealers earned wages not much in excess of minimum wage. We suspect that one reason why the drug couriers are paid substantially more than the low level drug dealers is that these labor markets are fundamentally different. While Levitt and Venkatesh (2000) argue that low level drug dealers are essentially competing in a labor market tournament, where some "winners" will eventually make it up the ranks eventually obtaining much higher earnings, many of the narratives of individuals in our data suggest that drug mules are essentially outside of the drug retail operation and not looking to "work their way up" within the organization.10 
A draft is here and the authors are David Bjerk Caleb Mason.

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