Illegal activities such as counterfeiting, tax evasion, and the operation of illegal drug markets remain a serious problem throughout the world. Yet, there is still an open debate about how to fight these problems, what strategies to use and the costs that different enforcement strategies entail. On one side, the economic analysis of crime sees the decision to engage in illegal activities as rational and, as such, shaped by incentives and penalties (see Becker 1968 and Stigler 1970). The central prediction is that enforcement reduces crime to the extent that it increases its costs. On the other side of the debate, social scientists and pundits have raised several concerns about the role of enforcement. In particular, critics argue that criminals may be irrational, myopic, or predisposed to illegal behavior (Menninger 1968); that extrinsic penalties crowd out intrinsic motivations (Frey 1997); or that enforcement may backfire if it conveys information about widespread illegal behavior (Benabou and Tirole 2003, 2006). The debate also suffers from lack of abundant evidence, in part due to the lack of exogenous sources of variation in enforcement strategies required to uncover their causal impact on crime and illegal activities.

Our paper contributes to the growing literature aimed at disentangling and quantifying the causal effects of enforcement on crime and illicit activities. We use the war on drugs in Colombia as a case study, focusing on the role that aerial spraying with herbicides has on illegal coca cultivation. At least since 1996, Colombia has been the world’s largest cocaine producer and grower of coca crops (the raw input for producing cocaine). Coca cultivation takes place in remote areas of the country with little institutional presence, where farmers face the risk of being detected and their illegal crops being aerially sprayed with herbicides. When coca crops are sprayed with herbicides they are partially lost, which in principle should increase the cost of this illegal activity and reduce the farmers ‘incentive to pursue it. Our goal in this paper is to assess the effectiveness of this form of enforcement in reducing coca cultivation.

We exploit the geographic and time variation on aerial spraying induced by a diplomatic friction between the governments of Ecuador and Colombia around 2006. In 2000, the Ecuadorian government alleged that Colombian aerial spraying campaigns near the frontier were causing health problems, productivity losses, and environmental damage in their territory. In response, the Colombian government committed to completely stop aerial spraying campaigns within a 10 km band around the international frontier with Ecuador at the beginning of 2006. The Colombian government broke its commitment at the end of 2006 and continued spraying within the band throughout 2007—though considerably less so than before. However, aerial spraying in the 10 km band from the frontier completely stopped in 2008, in response to a lawsuit filed by the Ecuadorian government against its Colombian counterpart in international courts.

We use satellite and georeferenced data of coca cultivation and aerial spraying on 1-squarekm (100 hectares) grid cells between 2000 and 2010 and estimate the effect of aerial spraying using two complementary methodologies. First, we use a fuzzy regression discontinuity design and compare coca cultivation in cells near both sides of the 10 km threshold. We show that aerial spraying changed discontinuously at the 10 km threshold during the years in which Colombia agreed not to spray the exclusion area, while other covariates and policies did not. We use this geographic discontinuity in enforcement to identify its effect on coca cultivation.

Additionally, we report results obtained using a conditional differences in differences estimation. In particular, we compare the cultivation of illicit crops in cells within the exclusion area to that in similar cells located 10 to 20 km away from the frontier, an area that continued to be sprayed throughout the years in our sample. Both groups of cells were exposed to aerial spraying before 2006, but after that, only the latter group of grid cells continued to be sprayed. Our estimator attributes the differential change in cultivation after 2006 across both areas to the change in enforcement. To guarantee the comparability of both groups, we control for coca