Squealer Dealers: The Market for Information in Federal Drug Trafficking Prosecutions

Never rat on your friends and always keep your mouth shut. Jimmy Conway, Goodfellas Citing his "invaluable" aid in the war against the Mafia, a Federal judge yesterday rewarded a once-powerful mob figure who became a major Government informer by sentencing him to just five years in prison, despite his admitted involvement in 19 murders. The New York Times, September 27, 19941 I. INTRODUCTION Since the seminal theoretical work of Becker (1968), the economics of crime has developed an extensive empirical literature. (2) This article adds to that literature by studying markets for information in federal prosecutions of drug trafficking conspiracies. In these markets, law enforcement demands information that can help prosecute and imprison suspected drug traffickers, while other drug traffickers supply the information. (3) The price over which demanders and suppliers higgle is the size of an informer's sentence reduction. (4) Mustard (2001), using federal sentencing data, found that different demographic groups have different rates--relative quantities--of providing "substantial assistance" (the federal legal term meaning "information") against other defendants. (5) This article adds to Mustard (2001) by using federal sentencing of convicted drug traffickers to uncover whether different demographic groups have different relative prices for their information, i.e., whether different groups receive larger sentence reductions (higher prices) or smaller sentence reductions (lower prices) when providing substantial assistance. Then, in a simple manner similar to well-known examinations of the returns to education in the 1970s and 1980s (Levy and Mumane 1992; Murphy and Welch 1989), price and quantity determine whether certain groups experience different relative demand or relative supply for their testimony. Groups experiencing high relative demand have their information highly sought by law enforcement, and therefore have high rates (quantities) of providing substantial assistance and large sentence reductions (prices) when doing so. Those with low relative demand have low quantities and low prices. Groups with high relative supply of substantial assistance have high quantities but low prices, while those with low relative supply have low quantities and high prices. This article further adds to the literature by going beyond demographic factors and examining what criminality-related factors--e.g., criminal history, role in a criminal conspiracy, and type of drug dealt--affect supply and demand for information, and by examining supply and demand conditional on expected prison sentence. Results show that women and better-educated defendants experience high relative demand for information while blacks, Hispanics, and non-U.S. citizens experience low relative demand. Groups facing long prison sentences-- dealers of harder drugs, those with long criminal histories, and high-level dealers--have high relative supply, while those facing short sentences--primarily low-level dealers--have low relative supply. When controlling for expected sentence, crack dealers, high-level dealers, and dealers with long criminal histories experience low demand. Race-specific estimations show that women of all races experience high relative demand for information. The rest of this article is organized as follows. Section II discusses the federal criminal-justice system, emphasizing reforms established by the Sentencing Reform Act of 1984 and the Anti-Drug Abuse Act of 1986. Section III discusses the data and provides summary statistics. Section IV discusses my empirical methodology. Section V shows results and Section VI attempts to explain them. Section VII discusses results from race-specific estimations and Section VIII concludes. II. FEDERAL CRIMINAL SENTENCING Through most of the 1980s and before, federal judges possessed near-total discretion in determining sentences for criminals convicted of violating federal statutes (e. …