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The governance institutions of a drug trafficking organization

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Abstract

How do drug trafficking organizations organize? Drug trafficking organizations continue to operate effectively despite incentives for members to defect, pressure from damaged communities, and government interdiction efforts. This paper identifies the problem of defection in this context and applies insights from the literatures on club goods and extralegal governance institutions to explain the puzzling organization and activities of one of Mexico’s most dangerous drug trafficking organizations, La Familia Michoacana. The group uses a reward and punishment scheme to prevent defection from members and to elicit cooperation from the community and government.

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Notes

  1. In criminology, past work on drug traffickers focuses on network analysis explanations rather than internal governance institutions, and this work does not examine Mexican drug traffickers (Natarajan 2000; Klerks 2001; Kenney 2007).

  2. Just as traditional political bodies require mechanisms for facilitating internal cooperation and decision-making, criminal organizations must create internal governance institutions (Levitt and Venkatesh 2000; Leeson 2007, 2009a, 2010; Leeson and Skarbek 2010).

  3. In addition to drawing on superstition and religion, governance institutions have also used physical battles between individuals to adjudicate disputes efficiently. These operated as an all-pay auction that allocated a resource to the person who valued it most highly (Hillman and Samet 1987; Leeson 2011).

  4. Related work examines the similarities and differences between public and private action in the context of crime and punishment (Leeson 2009b; D’Amico 2010).

  5. The ability to use violence is a distinguishing characteristic of criminal organizations and has important implications for their organizations (Leeson and Rogers 2012).

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Acknowledgements

The authors thank two anonymous referees, Matt Dickenson, Cassy Dorff, Peter Leeson, Garrett Roth, Emily Skarbek, and William Shughart for comments.

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Authors and Affiliations

  1. Duke University, Durham, NC, USA

    James Kostelnik

  2. King’s College London, London, UK

    David Skarbek

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  1. James Kostelnik
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Correspondence to David Skarbek.

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Kostelnik, J., Skarbek, D. The governance institutions of a drug trafficking organization. Public Choice 156, 95–103 (2013). https://doi.org/10.1007/s11127-012-0050-x

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