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Identifying Demand Responses to Illegal Drug Supply Interdictions

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Author Info

  • Scott Cunningham

    ()
    (Department of Economics, Baylor University)

  • Keith Finlay

    ()
    (Department of Economics, Tulane University)

Abstract

The optimality of supply interventions for addictive drugs is a function of demand responses to price, enforcement costs, and the relative size of external costs. Researchers need credible estimates of demand responses, but most research designs use price series affected by law enforcement actions. We present plausibly causal estimates of the price elasticities of demand for various drugs when enforcement costs are relatively low. We exploit arguably exogenous shocks to methamphetamine supplies to identify the effect of methamphetamine prices on demand for methamphetamine, alcohol, cocaine, heroin, and marijuana. Methamphetamine demand is price inelastic with substantial substitution to other drugs.

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File URL: http://econ.tulane.edu/RePEc/pdf/tul1312.pdf
File Function: First Version, March 2013
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Bibliographic Info

Paper provided by Tulane University, Department of Economics in its series Working Papers with number 1312.

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Length: 31 pages
Date of creation: Mar 2013
Date of revision:
Handle: RePEc:tul:wpaper:1312

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Related research

Keywords: illegal drugs; addiction; demand; substitution; War on Drugs; methamphetamine;

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  1. Scott Cunningham & Keith Finlay, 2013. "Parental Substance Use And Foster Care: Evidence From Two Methamphetamine Supply Shocks," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 764-782, 01.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Are illegal drugs price elastic?
    by Economic Logician in Economic Logic on 2013-04-17 14:03:00

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