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Are Illegal Drugs Inferior Goods?

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  • Suryadipta Roy

    (West Virginia University)

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    Abstract

    Using data from the National Survey on Drug Use and Health, evidence of income inferiority in illegal drug consumption is presented. This is done by estimation of binary choice probit models with endogenous regressors. The simultaneity issue between drug consumption and income has been addressed by using a two-step estimation procedure. The results indicate that accounting for simultaneity shows income inferiority with regard to drug consumption. An implication of this study is that income distributive policies might be effective in controlling drug consumption. It also points out the regressive nature of the government’s substance abuse program.

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    File URL: http://www.be.wvu.edu/phd_economics/pdf/05-01.pdf
    File Function: First version, 2005
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    Bibliographic Info

    Paper provided by Department of Economics, West Virginia University in its series Working Papers with number 05-01 Classification- JEL: I12, I18.

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    Length: 56 pages
    Date of creation: 2005
    Date of revision:
    Handle: RePEc:wvu:wpaper:05-01

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    Web page: http://www.be.wvu.edu/phd_economics/
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    Keywords: income inferiority; illegal drugs; public policy;

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    1. Becker, Gary S & Murphy, Kevin M, 1988. "A Theory of Rational Addiction," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(4), pages 675-700, August.
    2. Grossman, Michael & Chaloupka, Frank J., 1998. "The demand for cocaine by young adults: a rational addiction approach," Journal of Health Economics, Elsevier, Elsevier, vol. 17(4), pages 427-474, August.
    3. Sickles, Robin & Taubman, Paul, 1991. "Who Uses Illegal Drugs?," American Economic Review, American Economic Association, American Economic Association, vol. 81(2), pages 248-51, May.
    4. Murphy, Kevin M & Topel, Robert H, 2002. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 20(1), pages 88-97, January.
    5. Andrew M. Gill & Robert J. Michaels, 1992. "Does drug use lower wages?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 45(3), pages 419-434, April.
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