The effect of legal ivory sales on elephant poaching

Nitin Sekar and I have a new paper out today on the effect of large-scale legal international sales of ivory designed slow poaching of elephants. The basic theory is that these sales should flood black markets, depressing the price of ivory and reducing the incentive to poach. We point out that these sales might also attract new consumers of ivory (who were unwilling to buy it when it was illegal but are interested in ivory when it becomes legal and sheds the stigma of contraband) and/or make it easier to smuggle illegal ivory (because it's easier to pretend that illegal ivory is legal once there is legal stuff floating around). Under the right conditions, these two effects can overpower the "market flooding" effect that policy was targeting, causing a legal sale to backfire and actual generate more poaching than before thee sale. This seems to be what happened when there was a large experimental sale announced in 2008:

Here's the paper and abstract:

Does Legalization Reduce Black Market Activity? Evidence from a Global Ivory Experiment and Elephant Poaching Data
(Solomon Hsiang and Nitin Sekar)

Abstract: Black markets are estimated to represent a fifth of global economic activity, but their response to policy is poorly understood because participants systematically hide their actions. It is widely hypothesized that relaxing trade bans in illegal goods allows legal supplies to competitively displace illegal supplies, but a richer economic theory provides more ambiguous predictions. Here we evaluate the first major global legalization experiment in an internationally banned market, where a monitoring system established before the experiment enables us to observe the behavior of illegal suppliers before and after. International trade of ivory was banned in 1989, with global elephant poaching data collected by field researchers since 2003. A one-time legal sale of ivory stocks in 2008 was designed as an experiment, but its global impact has not been evaluated. We find that international announcement of the legal ivory sale corresponds with an abrupt ~66% increase in illegal ivory production across two continents, and a possible ten-fold increase in its trend. An estimated ~71% increase in ivory smuggling out of Africa corroborates this finding, while corresponding patterns are absent from natural mortality and alternative explanatory variables. These data suggest the widely documented recent increase in elephant poaching likely originated with the legal sale. More generally, these results suggest that changes to producer costs and/or consumer demand induced by legal sales can have larger effects than displacement of illegal production in some global black markets, implying that partial legalization of banned goods does not necessarily reduce black market activity.