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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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References

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  1. Jeffrey A. Miron, 2003. "The Effect of Drug Prohibition on Drug Prices: Evidence from the Markets for Cocaine and Heroin," NBER Working Papers 9689, National Bureau of Economic Research, Inc.
  2. Henry Saffer & Frank J. Chaloupka, 1999. "Demographic Differentials in the Demand for Alcohol and Illicit Drugs," NBER Chapters, in: The Economic Analysis of Substance Use and Abuse: An Integration of Econometrics and Behavioral Economic Research, pages 187-212 National Bureau of Economic Research, Inc.
  3. 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.
  4. 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.
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  7. Jeffrey A. Miron, 1997. "The Effects of Alcohol Prohibition on Alcohol Consumption," Papers 0078, Boston University - Industry Studies Programme.
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  9. Kenneth W. Clements, 2004. "Three Facts About Marijuana Prices," Economics Discussion / Working Papers 04-06, The University of Western Australia, Department of Economics.
  10. 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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  13. 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.
  14. Henry Saffer & Frank Chaloupka, 1995. "The Demand for Illicit Drugs," NBER Working Papers 5238, National Bureau of Economic Research, Inc.
  15. Massimo Motta, 1996. "Advertising bans," Economics Working Papers 205, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 1997.
  16. 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.
  17. Barten, Anton P, 1977. "The Systems of Consumer Demand Functions Approach: A Review," Econometrica, Econometric Society, vol. 45(1), pages 23-51, January.
  18. 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.
  19. Clements,Kenneth W. & Zhao,Xueyan, 2009. "Economics and Marijuana," Cambridge Books, Cambridge University Press, number 9780521884952, November.
  20. Selvanathan, Saroja, 1987. "A Monte Carlo test of preference independence," Economics Letters, Elsevier, vol. 25(3), pages 259-261.
  21. 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.
  22. Rosalie Liccardo Pacula, 1998. "Adolescent Alcohol and Marijuana Consumption: Is There Really a Gateway Effect?," NBER Working Papers 6348, National Bureau of Economic Research, Inc.
  23. Friedrich Schneider, 2001. "What Do We Know About the Shadow Economy?," World Economics, World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 2(4), pages 19-32, October.
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Cited by:
  1. Kenneth W. Clements, 2002. "Three Facts About Marijuana Prices," Economics Discussion / Working Papers 02-10, The University of Western Australia, Department of Economics.
  2. van Ours, Jan C & Williams, Jenny, 2005. "Cannabis Prices and Dynamics of Cannabis Use," CEPR Discussion Papers 4991, C.E.P.R. Discussion Papers.
  3. Kenneth W. Clements, 2006. "Pricing and Packaging: The Case of Marijuana," The Journal of Business, University of Chicago Press, vol. 79(4), pages 2019-2044, July.
  4. 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.
  5. 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.
  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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