Working Paper: NBER ID: w11737
Authors: Philip J. Cook; Jens Ludwig; Sudhir A. Venkatesh; Anthony A. Braga
Abstract: This paper provides an economic analysis of underground gun markets drawing on interviews with gang members, gun dealers, professional thieves, prostitutes, police, public school security guards and teens in the city of Chicago, complemented by results from government surveys of recent arrestees in 22 cities plus administrative data for suicides, homicides, robberies, arrests and confiscated crime guns. We find evidence of considerable frictions in the underground market for guns in Chicago. We argue that these frictions are due primarily to the fact that the underground gun market is both illegal and "thin" -- the number of buyers, sellers and total transactions is small and relevant information is scarce. Gangs can help overcome these market frictions, but the gang's economic interests cause gang leaders to limit supply primarily to gang members, and even then transactions are usually loans or rentals with strings attached.
Keywords: No keywords provided
JEL Codes: K42; L1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| illegality and thinness of the market (K49) | considerable frictions in the underground gun market in Chicago (K42) |
| considerable frictions in the underground gun market in Chicago (K42) | high transaction costs and prices (G19) |
| gangs mitigate some market frictions (F12) | limited access primarily to gang members (P37) |
| illegality of the market (K42) | complications in finding trustworthy trading partners (F10) |
| complications in finding trustworthy trading partners (F10) | high transaction costs (D23) |
| youth joining gangs (J13) | access to firearms (H56) |