Opium Production in Afghanistan: Which are the Key Determinants of Opium Production?

Abstract: This thesis analyses the phenomenon of widespread illicit industries in developing countries; specifically focusing on the situation of the Afghan opium economy. The thesis aims to determine the key factors affecting the level of Afghan opium production. The potential determinants have been divided into two perspectives: either the opium cultivation has grown large due to rational decisions by farmers driven by positive economic incentives, or farmers have been pressured, or even forced, into opium cultivation due to the lack of alternatives and the widespread poverty and corruption. In parallel, six variables have been defined and will be tested in an econometric regression; opium price, opium yield, security level in Afghanistan, poverty, Gross Domestic Product per capita and the alternative livelihood of wheat production. The finding of the thesis is that both perspectives are correct to some extent; however, the impoverished Afghan population is mainly driven by positive economic incentives and that is why the opium production has flourished.