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The Effects of Prices and Policies on the Demand for Marijuana: Evidence from the National Household Surveys on Drug Abuse

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  • Matthew C. Farrelly
  • Jeremy W. Bray
  • Gary A. Zarkin
  • Brett W. Wendling
  • Rosalie Liccardo Pacula

Abstract

Recent studies have shown that efforts to curb alcohol use by increasing the price of alcohol and limiting youth's access have succeeded, but they may have had the unintended consequencce of increasing marijuana use. This possibility is troubling in light of a recent government report that shows that marijuana use among teens more than doubled between 1990 and 1997. What impact will the proposed large increase in cigarette prices have on the demand for other substances such as marijuana? To better understand how the demand for marijuana responds to changes in the policies and prices that affect its use, we explore the National Household Survy on Drug Abuse (NHSDA). Overall, we find that marijuana, alcohol, and tobacco are complements, sot that increasing the price of any one will decrease the demand for marijuana. The results of this paper will help guide the creation of comprehensive policies that curb the use of marijuana in two ways: first, they quantify the effects of policies aimed at curbing the use of each substance, allowing policymakers to evaluate alternative policy options; and second, they clarify the dynamics and interactions between alcohol, tobacco, and marijuana use in response to government policies.

Suggested Citation

  • 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.
  • Handle: RePEc:nbr:nberwo:6940 Note: HE
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    References listed on IDEAS

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    1. 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.
    2. Frank J. Chaloupka & Rosalie Liccardo Pacula & Matthew C. Farrelly & Lloyd D. Johnston & Patrick M. O'Malley, 1999. "Do Higher Cigarette Prices Encourage Youth to Use Marijuana?," NBER Working Papers 6939, National Bureau of Economic Research, Inc.
    3. Manning, Willard G. & Blumberg, Linda & Moulton, Lawrence H., 1995. "The demand for alcohol: The differential response to price," Journal of Health Economics, Elsevier, vol. 14(2), pages 123-148, June.
    4. 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.
    5. Matthew C. Farrelly & William N. Evans & Edward Montgomery, 1999. "Do Workplace Smoking Bans Reduce Smoking?," American Economic Review, American Economic Association, vol. 89(4), pages 728-747, September.
    6. 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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    Citations

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    Cited by:

    1. 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.
    2. Dee, Thomas S., 1999. "The complementarity of teen smoking and drinking," Journal of Health Economics, Elsevier, vol. 18(6), pages 769-793, December.
    3. Sara Markowitz, 2001. "The Role of Alcohol and Drug Consumption in Determining Physical Fights and Weapon Carrying by Teenagers," Eastern Economic Journal, Eastern Economic Association, vol. 27(4), pages 409-432, Fall.
    4. Clifford F. Thies, 2012. "The Relationship Between Enforcement and the Price of Marijuana," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 28(Fall 2012), pages 79-90.
    5. Parey, Matthias & Rasul, Imran, 2017. "Measuring the Market Size for Cannabis: A New Approach Using Forensic Economics," CEPR Discussion Papers 12161, C.E.P.R. Discussion Papers.
    6. Markowitz, Sara, 2005. "Alcohol, Drugs and Violent Crime," International Review of Law and Economics, Elsevier, vol. 25(1), pages 20-44, March.
    7. Sarah Brown & Mark N Harris & Jake Prendergast & Preety Srivastava, 2015. "Pharmaceutical Drug Misuse, Industry of Employment and Occupation," Bankwest Curtin Economics Centre Working Paper series WP1501, Bankwest Curtin Economics Centre (BCEC), Curtin Business School.
    8. Carlos Casacuberta & Mariana Gerstenblüth & Patricia Triunfo, 2012. "Aportes del análisis económico al estudio de las drogas," Documentos de Trabajo (working papers) 0112, Department of Economics - dECON.
    9. Sen, Bisakha & Agarwal, Rajshree & Hofler, Richard, 2002. "Teenage Indulgence in Cigarettes, Alcohol and Marijuana: Evidence of a "Gateway" Effect," Working Papers 02-0103, University of Illinois at Urbana-Champaign, College of Business.
    10. Rosalie Liccardo Pacula & Jamie F. Chriqui & Joanna King, 2003. "Marijuana Decriminalization: What does it mean in the United States?," NBER Working Papers 9690, National Bureau of Economic Research, Inc.
    11. Kelly, Elaine & Rasul, Imran, 2014. "Policing cannabis and drug related hospital admissions: Evidence from administrative records," Journal of Public Economics, Elsevier, vol. 112(C), pages 89-114.
    12. DiNardo, John & Lemieux, Thomas, 2001. "Alcohol, marijuana, and American youth: the unintended consequences of government regulation," Journal of Health Economics, Elsevier, vol. 20(6), pages 991-1010, November.
    13. D. Mark Anderson & Benjamin Hansen & Daniel I. Rees, 2015. "Medical Marijuana Laws and Teen Marijuana Use," American Law and Economics Review, Oxford University Press, vol. 17(2), pages 495-528.
    14. Kenneth Clements & Yihui Lan & Xueyan Zhao, 2010. "The demand for marijuana, tobacco and alcohol: inter-commodity interactions with uncertainty," Empirical Economics, Springer, vol. 39(1), pages 203-239, August.
    15. J. Williams & Rosalie Liccardo Pacula & Frank J. Chaloupka & Henry Wechsler, 2004. "Alcohol and marijuana use among college students: economic complements or substitutes?," Health Economics, John Wiley & Sons, Ltd., vol. 13(9), pages 825-843.
    16. Anderson, D. Mark & Rees, Daniel I., 2012. "Per Se Drugged Driving Laws and Traffic Fatalities," IZA Discussion Papers 7048, Institute for the Study of Labor (IZA).
    17. Crost, Benjamin & Guerrero, Santiago, 2012. "The effect of alcohol availability on marijuana use: Evidence from the minimum legal drinking age," Journal of Health Economics, Elsevier, vol. 31(1), pages 112-121.
    18. Patrick M. O'Malley & Michael Grossman & Frank J. Chaloupka, 2001. "Marijuana and Youth," NBER Chapters,in: Risky Behavior among Youths: An Economic Analysis, pages 271-326 National Bureau of Economic Research, Inc.
      • R. L. Pacula & M. Grossman & F. J. Chaloupka & P. M. O'Malley & L. Johnston & M. C. Farrelly, 2000. "Marijuana and Youth," NBER Working Papers 7703, National Bureau of Economic Research, Inc.
    19. Jofre-Bonet, Mireia & Petry, Nancy M., 2008. "Trading apples for oranges?: Results of an experiment on the effects of Heroin and Cocaine price changes on addicts' polydrug use," Journal of Economic Behavior & Organization, Elsevier, vol. 66(2), pages 281-311, May.

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    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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