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Measuring the Market Size for Cannabis: A New Approach Using Forensic Economics

Listed author(s):
  • Parey, Matthias
  • Rasul, Imran

Quantifying the market size for cannabis is important given vigorous policy debates about how to intervene in this market. We develop a new approach to measuring the size of the cannabis market using forensic economics. The key insight is that cannabis consumption often requires the use of complementary legal inputs: roll-your-own tobacco and rolling papers. The forensic approach specifies how legal and illegal inputs are combined in the production of hand-rolled cigarettes and cannabis joints. These input relationships, along with market adding-up conditions, can then be used to infer the size of the cannabis market. We prove proof-of-concept that this approach can be readily calibrated using: (i) point-of-sales data on the legal inputs of roll-your-own tobacco and rolling papers; (ii) input parameter estimates drawn from a wide-ranging interdisciplinary evidence base. We then implement the approach using data from 2008-9. For those years, the forensic estimates for the UK cannabis market are near double those derived from standard demand-side approaches. We make precise what drives the measurement gap between methods by establishing: (i) the parameter adjustments needed in demand-side approaches to match the forensic measure; (ii) the changes in methodology to the forensic approach needed to match the demand-side estimate. Our analysis develops an agenda on measurement and data collection that allows for credible cost-benefit analysis of policy interventions in illicit drug markets.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 12161.

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Date of creation: Jul 2017
Handle: RePEc:cpr:ceprdp:12161
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  1. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters,in: Essays in the Economics of Crime and Punishment, pages 1-54 National Bureau of Economic Research, Inc.
  2. Sandip Sukhtankar, 2012. "Sweetening the Deal? Political Connections and Sugar Mills in India," American Economic Journal: Applied Economics, American Economic Association, vol. 4(3), pages 43-63, July.
  3. Stephen Pudney, 2007. "Rarely pure and never simple: extracting the truth from self-reported data on substance use," CeMMAP working papers CWP11/07, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  4. Matthew C. Farrelly & Jeremy W. Bray & Gary A. Zarkin & Brett W. Wendling & Rosalie Liccardo Pacula, 1999. "The Effects of Prices and Policies on the Demand for Marijuana: Evidence from the National Household Surveys on Drug Abuse," NBER Working Papers 6940, National Bureau of Economic Research, Inc.
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