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Illicit drug use among arrestees, prices and policy

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  • Dave, Dhaval

Abstract

Prior studies, by relying on nationally representative surveys, have overlooked the important fact that use of addictive substances is not uniformly distributed; subgroups of hardcore users account for most of the drug consumption. This study employs the Arrestee Drug Abuse Monitoring system to analyze the demand for cocaine and heroin by urban arrestees, employing objective indicators of use based on urinalysis. The data are repeated city cross sections, and panel data methodology is employed to account for endogeneity. Cocaine and heroin prices have a negative effect on the probability of use even among this group of heavy users. Results indicate that subjective, self-reported measures of participation are likely to be under-reported, which may impart bias to estimates of the price elasticity. The own-price cocaine participation elasticity is about -0.15, and the own-price heroin participation elasticity is about -0.10 for arrestees. This contemporaneous elasticity understates the full effect, and the long-run price elasticity is about twice the magnitude. The magnitude of the price response is substantially smaller relative to the estimates in the prior literature, and calculations suggest that further enforcement and interdiction-driven increases in drug prices may not be cost-effective.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 63 (2008)
Issue (Month): 2 (March)
Pages: 694-714

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Handle: RePEc:eee:juecon:v:63:y:2008:i:2:p:694-714

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Web page: http://www.elsevier.com/locate/inca/622905

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  1. Henry Saffer & Frank Chaloupka, 1995. "The Demand for Illicit Drugs," NBER Working Papers 5238, National Bureau of Economic Research, Inc.
  2. Dhaval Dave, 2004. "The Effects of Cocaine and Heroin Prices on Drug-Related Emergency Department Visits," NBER Working Papers 10619, National Bureau of Economic Research, Inc.
  3. Kuziemko, Ilyana & Levitt, Steven D., 2004. "An empirical analysis of imprisoning drug offenders," Journal of Public Economics, Elsevier, Elsevier, vol. 88(9-10), pages 2043-2066, August.
  4. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  5. Michael Grossman & Frank J. Chaloupka & Ismail Sirtalan, 1995. "An Empirical Analysis of Alcohol Addiction: Results from the Monitoring the Future Panels," NBER Working Papers 5200, National Bureau of Economic Research, Inc.
  6. Jeffrey A. Miron, 2003. "The Effect of Drug Prohibition on Drug Prices: Evidence from the Markets for Cocaine and Heroin," The Review of Economics and Statistics, MIT Press, MIT Press, vol. 85(3), pages 522-530, August.
  7. Jeff DeSimone & Matthew C. Farrelly, . "Price and Enforcement Effects on Cocaine and Marijuana Demand," Working Papers, East Carolina University, Department of Economics 0101, East Carolina University, Department of Economics.
  8. Caulkins Jonathan P., 1995. "Domestic Geographic Variation in Illicit Drug Prices," Journal of Urban Economics, Elsevier, Elsevier, vol. 37(1), pages 38-56, January.
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Cited by:
  1. O'Flaherty, Brendan & Sethi, Rajiv, 2010. "The racial geography of street vice," Journal of Urban Economics, Elsevier, Elsevier, vol. 67(3), pages 270-286, May.
  2. Caulkins, Jonathan P. & Baker, David, 2010. "Cobweb dynamics and price dispersion in illicit drug markets," Socio-Economic Planning Sciences, Elsevier, Elsevier, vol. 44(4), pages 220-230, December.

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