IDEAS home Printed from https://ideas.repec.org/a/eee/jhecon/v17y1998i4p427-474.html
   My bibliography  Save this article

The demand for cocaine by young adults: a rational addiction approach

Author

Listed:
  • Grossman, Michael
  • Chaloupka, Frank J.

Abstract

This paper applies the rational addiction model, which emphasizes the interdependency of past, current, and future consumption of an addictive good, to the demand for cocaine by young adults in the Monitoring the Future Panel. The price of cocaine is added to this survey from the System to Retrieve Information from Drug Evidence (STRIDE) maintained by the Drug Enforcement Administration of the U.S. Department of Justice. Results suggest that annual participation and frequency of use given participation are negatively related to the price of cocaine. In addition current participation is positively related to past and future participation, and current frequency of use given participation is positively related to past and future frequency of use. The long-run price elasticity of total consumption (participation multiplied by frequency given participation) of -1.18 is substantial. A permanent 10 percent reduction in price due, for example, to the legalization of cocaine would cause the number of cocaine users to grow by slightly more than 8 percent and would increase the frequency of use among users by a little more than 3 percent. Surely, both proponents and opponents of drug legalization should take account of this increase in consumption in debating their respective positions.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Grossman, Michael & Chaloupka, Frank J., 1998. "The demand for cocaine by young adults: a rational addiction approach," Journal of Health Economics, Elsevier, vol. 17(4), pages 427-474, August.
    • Handle: RePEc:eee:jhecon:v:17:y:1998:i:4:p:427-474
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167-6296(97)00046-5
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Manning, W. G. & Duan, N. & Rogers, W. H., 1987. "Monte Carlo evidence on the choice between sample selection and two-part models," Journal of Econometrics, Elsevier, vol. 35(1), pages 59-82, May.
    2. Grossman, Michael & Chaloupka, Frank J & Sirtalan, Ismail, 1998. "An Empirical Analysis of Alcohol Addiction: Results from the Monitoring the Future Panels," Economic Inquiry, Western Economic Association International, vol. 36(1), pages 39-48, January.
    3. Chaloupka, Frank, 1991. "Rational Addictive Behavior and Cigarette Smoking," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 722-742, August.
    4. Becker, Gary S & Grossman, Michael & Murphy, Kevin M, 1994. "An Empirical Analysis of Cigarette Addiction," American Economic Review, American Economic Association, vol. 84(3), pages 396-418, June.
    5. 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.
    6. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
    7. Silverman, Lester P. & Spruill, Nancy L., 1977. "Urban crime and the price of heroin," Journal of Urban Economics, Elsevier, vol. 4(1), pages 80-103, January.
    8. Becker, Gary S & Murphy, Kevin M, 1988. "A Theory of Rational Addiction," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 675-700, August.
    9. James J. Heckman & Thomas E. MaCurdy, 1985. "A Simultaneous Equations Linear Probability Model," Canadian Journal of Economics, Canadian Economics Association, vol. 18(1), pages 28-37, February.
    10. Nisbet, Charles T & Vakil, Firouz, 1972. "Some Estimates of Price and Expenditure Elasticities of Demand for Marijuana Among U.C.L.A. Students," The Review of Economics and Statistics, MIT Press, vol. 54(4), pages 473-475, November.
    11. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 38(2), pages 112-134.
    12. Griliches, Zvi & Hausman, Jerry A., 1986. "Errors in variables in panel data," Journal of Econometrics, Elsevier, vol. 31(1), pages 93-118, February.
    13. 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.
    14. Cragg, John G, 1971. "Some Statistical Models for Limited Dependent Variables with Application to the Demand for Durable Goods," Econometrica, Econometric Society, vol. 39(5), pages 829-844, September.
    15. Griliches, Zvi, 1979. "Sibling Models and Data in Economics: Beginnings of a Survey," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 37-64, October.
    16. Coate, Douglas & Grossman, Michael, 1988. "Effects of Alcoholic Beverage Prices and Legal Drinking Ages on Youth Alcohol Use," Journal of Law and Economics, University of Chicago Press, vol. 31(1), pages 145-171, April.
    17. Leung, Siu Fai & Yu, Shihti, 1996. "On the choice between sample selection and two-part models," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 197-229.
    18. Becker, Gary S & Grossman, Michael & Murphy, Kevin M, 1991. "Rational Addiction and the Effect of Price on Consumption," American Economic Review, American Economic Association, vol. 81(2), pages 237-241, May.
    19. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
    20. Keeler, Theodore E. & Hu, Teh-Wei & Barnett, Paul G. & Manning, Williard G., 1993. "Taxation, regulation, and addiction: A demand function for cigarettes based on time-series evidence," Journal of Health Economics, Elsevier, vol. 12(1), pages 1-18, April.
    21. Wasserman, Jeffrey & Manning, Willard G. & Newhouse, Joseph P. & Winkler, John D., 1991. "The effects of excise taxes and regulations on cigarette smoking," Journal of Health Economics, Elsevier, vol. 10(1), pages 43-64, May.
    22. Chaloupka, Frank J & Saffer, Henry & Grossman, Michael, 1993. "Alcohol-Control Policies and Motor-Vehicle Fatalities," The Journal of Legal Studies, University of Chicago Press, vol. 22(1), pages 161-186, January.
    23. Ehrlich, Isaac, 1973. "Participation in Illegitimate Activities: A Theoretical and Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 521-565, May-June.
    24. Caulkins Jonathan P., 1995. "Domestic Geographic Variation in Illicit Drug Prices," Journal of Urban Economics, Elsevier, vol. 37(1), pages 38-56, January.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jhecon:v:17:y:1998:i:4:p:427-474. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/inca/505560 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.