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

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  • Rasul, Imran
  • Parey, Matthias

Abstract

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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  • Rasul, Imran & Parey, Matthias, 2017. "Measuring the Market Size for Cannabis: A New Approach Using Forensic Economics," CEPR Discussion Papers 12161, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12161
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    Cited by:

    1. Tom Kirchmaier & Stephen Machin & Matteo Sandi & Robert Witt, 2020. "Prices, Policing and Policy: The Dynamics of Crime Booms and Busts," Journal of the European Economic Association, European Economic Association, vol. 18(2), pages 1040-1077.
    2. Arun Advani, 2022. "Who does and doesn't pay taxes?," Fiscal Studies, John Wiley & Sons, vol. 43(1), pages 5-22, March.
    3. Bhaskar, V. & Linacre, Robin & Machin, Stephen, 2019. "The economic functioning of online drugs markets," Journal of Economic Behavior & Organization, Elsevier, vol. 159(C), pages 426-441.
    4. Julian Hidalgo & Michelle Sovinsky, 2019. "Forensic Econometrics: Demand Estimation When Data are Missing," The Japanese Economic Review, Springer, vol. 70(3), pages 403-410, September.
    5. d'Este, Rocco, 2022. "Scientific Advancements in Illegal Drugs Production and Institutional Responses: New Psychoactive Substances, Self-Harm, and Violence inside Prisons," IZA Discussion Papers 15248, Institute of Labor Economics (IZA).

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    More about this item

    JEL classification:

    • C80 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - General
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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