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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
    as

    Download full text from publisher

    File URL: http://repec.tulane.edu/RePEc/pdf/tul1312.pdf
    File Function: First Version, March 2013
    Download Restriction: no

    References listed on IDEAS

    as
    1. Liu, Jin-Long & Liu, Jin-Tan & Hammitt, James K. & Chou, Shin-Yi, 1999. "The price elasticity of opium in Taiwan, 1914-1942," Journal of Health Economics, Elsevier, vol. 18(6), pages 795-810, December.
    2. Jeremy Arkes & Rosalie Liccardo Pacula & Susan M. Paddock & Jonathan P. Caulkins & Peter Reuter, 2008. "Why the DEA STRIDE Data are Still Useful for Understanding Drug Markets," NBER Working Papers 14224, National Bureau of Economic Research, Inc.
    3. Sandra L. Decker & Amy Ellen Schwartz, 2000. "Cigarettes and Alcohol: Substitutes or Complements?," NBER Working Papers 7535, National Bureau of Economic Research, Inc.
    4. Scott Cunningham & Keith Finlay, 2013. "Parental Substance Use And Foster Care: Evidence From Two Methamphetamine Supply Shocks," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 764-782, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Are illegal drugs price elastic?
      by Economic Logician in Economic Logic on 2013-04-17 19:03:00

    Citations

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    Cited by:

    1. Abby Alpert & David Powell & Rosalie Liccardo Pacula, 2017. "Supply-Side Drug Policy in the Presence of Substitutes: Evidence from the Introduction of Abuse-Deterrent Opioids," NBER Working Papers 23031, National Bureau of Economic Research, Inc.
    2. Abby Alpert & David Powell & Rosalie Liccardo Pacula, 2017. "Supply-Side Drug Policy in the Presence of Substitutes Evidence from the Introduction of Abuse-Deterrent Opioids," Working Papers WR-1181, RAND Corporation.

    More about this item

    Keywords

    illegal drugs; addiction; demand; substitution; War on Drugs; methamphetamine;

    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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