What Drug Dealers Tell Us About Their Costs of Doing Business

Interviews with low-level drug dealers in New York City reveal that the monetary costs of distributing drugs are modest. Hence, the proportion of sales revenue retained by these sellers is a meaningful indicator of their earnings. There are four distinct types of sellers, with systematic differences across types in the proportion of sales revenue retained. Entrepreneurs who own the drugs they sell retain the largest share (about 50%). Independent consignment sellers retain less (about 25%). Consignment sellers who operate within fixed selling locations or “spots” retain still less (10%), and the sellers who were paid hourly to sell from spots retained the smallest proportion (3%). These differences might explain variation in reports of sellers’ earnings and may have significant implications for the relative ability of enforcement against spots and enforcement against sellers operating outside of spots to drive up drug prices and suppress drug use. Running Head: Drug Dealers’ Costs of Doing Business This material is based upon work supported by a grant from The National Consortium On Violence Research, headquartered at the Heinz School of Public Policy and Management, at Carnegie Mellon University and by the National Science Foundation under Grant No. SBR9357936. Any opinions, findings, and conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of the National Science Foundation. * H. John Heinz III School of Public Policy, Carnegie-Mellon University, 5000 Forbes Ave., Pittsburgh, PA 15213. [email protected]. Phone: (412) 268-5064. FAX: (412) 268-7036. ** National Development and Research Institutes, Two World Trade Center, 16 Floor, New York, NY, 10048. [email protected]. Phone: (212) 845-4500. FAX: (212) 845-4698. *** School of Criminal Justice, Rutgers University, 15 Washington Street, Newark, NJ 01202. [email protected]. Phone: (212)845-4505. Fax: (973) 353-5896. **** H. John Heinz III School of Public Policy, Carnegie-Mellon University, 5000 Forbes Ave., Pittsburgh, PA 15213. [email protected]. Phone: (412) 268-3278. FAX: (412) 268-7036.