This paper develops a two-country, dynamic general equilibrium model of endogenous growth with illicit drugs and guns trade. With a trade framework that unifies both drug-control policies in consuming- and producing-country, as well as explicit modeling of firearm trade, the model is solved and parameterized to study the dynamic trade-off and growth effects of various drug-control policies. A production-consumption growth trade-off not previously documented in the literature is found. Further, under different conditions, and depending on the resulting gain in formal trade expansion, there are economic rationale to either a prohibitive or liberalization drug-control policy
