State Gun Policy and Cross-State Externalities: Evidence from Crime Gun Tracing

This paper provides a theoretical and empirical analysis of cross-state externalities associated with gun regulations that impact gun trafficking. Using tracing data, which identify the source state for crime guns recovered in destination states, we find that firearms tend to flow from states with weak laws to states with strict laws, satisfying a key theoretical condition for the existence of externalities. We also find that gun flows are more significant between nearby states, suggesting that externalities are spatial in nature. Finally, we present evidence that criminal possession of guns is higher in states exposed to weak laws in nearby states.