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Three Facts About Marijuana Prices

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  • Clements, Kenneth W.

Abstract

Australians are among the largest consumers of marijuana in the world, and estimates show that their expenditure on marijuana is about twice that on wine. In this paper we analyse the evolution of marijuana prices in Australia and show that they have declined in real terms by almost 40 percent over the last decade. This decline is far above that experienced by most agricultural products. Why has this occurred and what are the implications? The extensive adoption of hydroponic techniques in growing marijuana is likely to have enhanced productivity, with the benefits passed onto consumers in the form of lower prices. We find patterns in the prices that divide the country into three broad regions: (i) Sydney, where prices are highest; (ii) Melbourne and Canberra, which have somewhat lower prices; and (iii) everywhere else, where marijuana is cheapest. We also find that marijuana prices seem to be (positively) related to real estate prices. A further finding is that the price declines have stimulated marijuana consumption by about 15 percent, inhibited drinking (marijuana and alcohol being substitutes) and led to an increase in the real incomes of users in excess of $1 billion p. a.

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Bibliographic Info

Paper provided by Australian Agricultural and Resource Economics Society in its series 2003 Conference (47th), February 12-14, 2003, Fremantle, Australia with number 57846.

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Date of creation: Feb 2003
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Handle: RePEc:ags:aare03:57846

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Keywords: Demand and Price Analysis;

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References

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  13. Motta, Massimo, 1997. "Advertising Bans," CEPR Discussion Papers 1613, C.E.P.R. Discussion Papers.
  14. Kenneth W. Clements, 2002. "Three Facts About Marijuana Prices," Economics Discussion / Working Papers 02-10, The University of Western Australia, Department of Economics.
  15. Grilli, Enzo R & Yang, Maw Cheng, 1988. "Primary Commodity Prices, Manufactured Goods Prices, and the Terms of Trade of Developing Countries: What the Long Run Shows," World Bank Economic Review, World Bank Group, vol. 2(1), pages 1-47, January.
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  18. 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, vol. 85(3), pages 522-530, August.
  19. Clements, Kenneth W & Selvanathan, Antony & Selvanathan, Saroja, 1996. "Applied Demand Analysis: A Survey," The Economic Record, The Economic Society of Australia, vol. 72(216), pages 63-81, March.
  20. Kenneth W. Clements & Mert Daryal, 2001. "Marijuana Prices in Australia in the 1990s," Economics Discussion / Working Papers 01-01, The University of Western Australia, Department of Economics.
  21. Xueyan Zhao & Mark N. Harris, 2004. "Demand for Marijuana, Alcohol and Tobacco: Participation, Levels of Consumption and Cross-equation Correlations," The Economic Record, The Economic Society of Australia, vol. 80(251), pages 394-410, December.
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Cited by:
  1. Ours, J.C. van & Williams, J., 2005. "Cannabis Prices and Dynamics of Cannabis Use," Discussion Paper 2005-52, Tilburg University, Center for Economic Research.
  2. Kenneth W. Clements, 2004. "Pricing and Packaging: The Case of Marijuana," Economics Discussion / Working Papers 04-03, The University of Western Australia, Department of Economics.
  3. Kenneth W. Clements & Yihui Lan & Xueyan Zhao, 2005. "The Demand for Vice: Inter-Commodity Interactions with Uncertainty," Economics Discussion / Working Papers 05-30, The University of Western Australia, Department of Economics.
  4. James Fogarty, 2004. "The Own-Price Elasticity of Alcohol: A Meta-Analysis," Economics Discussion / Working Papers 04-01, The University of Western Australia, Department of Economics.
  5. Kenneth W. Clements, 2004. "Three Facts About Marijuana Prices," Economics Discussion / Working Papers 04-06, The University of Western Australia, Department of Economics.
  6. Kenneth W. Clements & Xueyan Zhao, 2005. "Economic Aspects of Marijuana," Economics Discussion / Working Papers 05-28, The University of Western Australia, Department of Economics.
  7. Zhao, Xueyan, 2003. "Drugs as a Rational Choice: Preliminary Explorations of Marijuana Consumption in Australia," 2003 Conference (47th), February 12-14, 2003, Fremantle, Australia 58276, Australian Agricultural and Resource Economics Society.

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