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Identifying Demand Responses to Illegal Drug Supply Interdictions

Author

Listed:
  • Scott Cunningham

    () (Department of Economics, Baylor University)

  • Keith Finlay

    () (Department of Economics, Tulane University)

Abstract

The optimality of supply interventions for addictive drugs is a function of demand responses to price, enforcement costs, and the relative size of external costs. Researchers need credible estimates of demand responses, but most research designs use price series affected by law enforcement actions. We present plausibly causal estimates of the price elasticities of demand for various drugs when enforcement costs are relatively low. We exploit arguably exogenous shocks to methamphetamine supplies to identify the effect of methamphetamine prices on demand for methamphetamine, alcohol, cocaine, heroin, and marijuana. Methamphetamine demand is price inelastic with substantial substitution to other drugs.

Suggested Citation

  • Scott Cunningham & Keith Finlay, 2013. "Identifying Demand Responses to Illegal Drug Supply Interdictions," Working Papers 1312, Tulane University, Department of Economics.
  • Handle: RePEc:tul:wpaper:1312
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    References listed on IDEAS

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    1. Are illegal drugs price elastic?
      by Economic Logician in Economic Logic on 2013-04-17 19:03:00

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    Cited by:

    1. Diego Zambiasi, 2020. "Drugs on the Web, Crime in the Streets - The Impact of Dark Web Marketplaces on Street Crime," Working Papers 202025, School of Economics, University College Dublin.
    2. Abby Alpert & David Powell & Rosalie Liccardo Pacula, 2018. "Supply-Side Drug Policy in the Presence of Substitutes: Evidence from the Introduction of Abuse-Deterrent Opioids," American Economic Journal: Economic Policy, American Economic Association, vol. 10(4), pages 1-35, November.

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    More about this item

    Keywords

    illegal drugs; addiction; demand; substitution; War on Drugs; methamphetamine;
    All these keywords.

    JEL classification:

    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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