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Three Facts About Marijuana Prices

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  • Kenneth W. Clements

    (UWA Business School, The University of Western Australia)

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 Australian marijuana prices over the last decade and show that they have declined in real terms by almost 40 per cent. This decline is far above that experienced by most agricultural products. Why has this occurred and what are the implications? One possible reason is the adoption of hydroponic growing techniques that have enhanced productivity and lowered costs and prices. Another reason is that laws have become softer and penalties reduced. 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. An exploratory analysis indicates the extent to which the price declines have stimulated marijuana consumption and inhibited the consumption of a substitute product, alcohol.

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Bibliographic Info

Paper provided by The University of Western Australia, Department of Economics in its series Economics Discussion / Working Papers with number 04-06.

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Length: 36 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:uwa:wpaper:04-06

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  1. Suren Basov & Mireille Jacobson & Jeffrey A. Miron, 2001. "Prohibition and the Market for Illegal Drugs," World Economics, World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 2(4), pages 133-157, October.
  2. Saffer, Henry & Chaloupka, Frank, 1999. "The Demand for Illicit Drugs," Economic Inquiry, Western Economic Association International, vol. 37(3), pages 401-11, July.
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  7. John DiNardo & Thomas Lemieux, 1992. "Alcohol, Marijuana, and American Youth: The Unintended Effects of Government Regulation," NBER Working Papers 4212, National Bureau of Economic Research, Inc.
  8. Kenneth W. Clements, 2002. "Three Facts About Marijuana Prices," Economics Discussion / Working Papers 02-10, The University of Western Australia, Department of Economics.
  9. Jeffrey A. Miron, 1999. "The Effect of Alcohol Prohibition on Alcohol Consumption," NBER Working Papers 7130, National Bureau of Economic Research, Inc.
  10. 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.
  11. Ernst R. Berndt & Neal J. Rappaport, 2001. "Price and Quality of Desktop and Mobile Personal Computers: A Quarter-Century Historical Overview," American Economic Review, American Economic Association, vol. 91(2), pages 268-273, May.
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  13. Massimo Motta, 1996. "Advertising bans," Economics Working Papers 205, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 1997.
  14. Kenneth Clements & Wana Yang & Simon Zheng, 1997. "Is utility additive? The case of alcohol," Applied Economics, Taylor & Francis Journals, vol. 29(9), pages 1163-1167.
  15. Yuan, Yuehong & Caulkins, Jonathan P., 1998. "The Effect of Variation in High-level Domestic Drug Enforcement on Variation in Drug Prices," Socio-Economic Planning Sciences, Elsevier, vol. 32(4), pages 265-276, December.
  16. Frank J. Chaloupka & Adit Laixuthai, 1994. "Do Youths Substitute Alcohol and Marijuana? Some Econometric Evidence," NBER Working Papers 4662, National Bureau of Economic Research, Inc.
  17. 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.
  18. 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.
  19. Clements,Kenneth W. & Zhao,Xueyan, 2009. "Economics and Marijuana," Cambridge Books, Cambridge University Press, number 9780521884952, October.
  20. 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.
  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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  23. Pacula, Rosalie Liccardo, 1998. "Does increasing the beer tax reduce marijuana consumption?," Journal of Health Economics, Elsevier, vol. 17(5), pages 557-585, October.
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Cited by:
  1. Kenneth W Clements & Yihui Lan & Xueyan Zhao, 2006. "The Demand for Vice: Inter-Commodity Interactions with Uncertainty," Economics Discussion / Working Papers 06-30, The University of Western Australia, Department of Economics.
  2. Clements, Kenneth W., 2004. "Three facts about marijuana prices," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(2), June.
  3. 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.
  4. van Ours, Jan C. & Williams, Jenny, 2007. "Cannabis prices and dynamics of cannabis use," Journal of Health Economics, Elsevier, vol. 26(3), pages 578-596, May.
  5. 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.
  6. 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.
  7. Kenneth W. Clements & Xueyan Zhao, 2005. "Economic Aspects of Marijuana," Economics Discussion / Working Papers 05-28, The University of Western Australia, Department of Economics.

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