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Even For Teenagers, Money Does Not Grow on Trees: Teenage Substance Use and Budget Constraints

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  • Sara Markowitz
  • John Tauras

Abstract

This paper is about the spending choices of youth, with a particular focus on how the demand for cigarettes, alcohol and marijuana are influenced by changes in the prices of other products. Youth tend to have small incomes and limited wants, with the result that many students spend the bulk of their income on only a few items. Fast food, clothing and entertainment make up the majority of products purchased by teenagers. The hypothesis to be tested in this project is that changes in the prices of the other goods commonly bought by teenagers will affect budget allocations and thereby affect the demand for substances. We estimate own and cross price effects using the prices of cigarettes, alcohol, marijuana and other consumer products including gasoline, clothing, entertainment, and fast food. Income effects are also estimated and show that teens with higher incomes and allowances are more likely to use substances. The policy implications of the results are discussed.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12300.

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Date of creation: Jun 2006
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Publication status: published as Markowitz, S and Tauras, J "Even For Teenagers, Money Does Not Grow on Trees: Teenage Substance Use and Budget Constraints" Cited in London Financial Times, September 23, 2006.
Handle: RePEc:nbr:nberwo:12300

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  1. Lewit, Eugene M & Coate, Douglas & Grossman, Michael, 1981. "The Effects of Government Regulation on Teenage Smoking," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 545-69, December.
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  3. Bask, Mikael & Melkersson, Maria, 2001. "Rationally Addicted to Drinking and Smoking?," UmeÃ¥ Economic Studies 567, Umeå University, Department of Economics.
  4. Frank J. Chaloupka & Adit Laixuthai, 1997. "Do Youths Substitute Alcohol and Marijuana? Some Econometric Evidence," Eastern Economic Journal, Eastern Economic Association, vol. 23(3), pages 253-276, Summer.
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  6. Cameron, Lisa & Williams, Jenny, 2001. "Cannabis, Alcohol and Cigarettes: Substitutes or Complements?," The Economic Record, The Economic Society of Australia, vol. 77(236), pages 19-34, March.
  7. Dee, Thomas S., 1999. "The complementarity of teen smoking and drinking," Journal of Health Economics, Elsevier, vol. 18(6), pages 769-793, December.
  8. Michael Grossman & Frank J. Chaloupka & Henry Saffer & Adit Laixuthai, 1994. "Effects of Alcohol Price Policy on Youth," NBER Working Papers 4385, National Bureau of Economic Research, Inc.
  9. Frank J. Chaloupka & Kenneth E. Warner, 1999. "The Economics of Smoking," NBER Working Papers 7047, National Bureau of Economic Research, Inc.
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  11. Frank J. Chaloupka & Rosalie Liccardo Pacula & Matthew C. Farrelly & Lloyd D. Johnston & Patrick M. O'Malley, 1999. "Do Higher Cigarette Prices Encourage Youth to Use Marijuana?," NBER Working Papers 6939, National Bureau of Economic Research, Inc.
  12. 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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  14. Farrelly, Matthew C. & Bray, Jeremy W. & Zarkin, Gary A. & Wendling, Brett W., 2001. "The joint demand for cigarettes and marijuana: evidence from the National Household Surveys on Drug Abuse," Journal of Health Economics, Elsevier, vol. 20(1), pages 51-68, January.
  15. Frank J. Chaloupka & Michael Grossman, 1996. "Price, Tobacco Control Policies and Youth Smoking," NBER Working Papers 5740, National Bureau of Economic Research, Inc.
  16. Gabriel A. Picone & Frank Sloan & Justin G. Trogdon, 2004. "The effect of the tobacco settlement and smoking bans on alcohol consumption," Health Economics, John Wiley & Sons, Ltd., vol. 13(10), pages 1063-1080.
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Cited by:
  1. Pudney, Stephen & Bryan, Mark & DelBono, Emilia, 2013. "Licensing and regulation of the cannabis market in England and Wales: Towards a cost-benefit analysis," MPRA Paper 50365, University Library of Munich, Germany.
  2. Lahav, Eyal & Benzion, Uri & Shavit, Tal, 2010. "Subjective time discount rates among teenagers and adults: Evidence from Israel," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 39(4), pages 458-465, August.
  3. Sen, Bisakha, 2009. "The relationship between frequency of family dinner and adolescent problem behaviors after adjusting for other family characteristics," MPRA Paper 24329, University Library of Munich, Germany.

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