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Konrad, Kai A. (1994): Drug policy and federalism. In: Public Choice, Vol. 80, No. 1-2: pp. 55-68
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Supply restricting drug policy is inefficient from an economic point of view, but is nevertheless widely used. This paper explains this phenomenon as individually rational behavior for local government. Because supply restriction gives addicts an incentive to migrate it has an external effect. This effect makes a policy of supply restrictions individually rational but leads to socially wasteful competition between local governments in a federal system. © 1994 Kluwer Academic Publishers.