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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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    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

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    3. Zambiasi, Diego, 2022. "Drugs on the Web, Crime in the Streets. The Impact of Shutdowns of Dark Net Marketplaces on Street Crime," Journal of Economic Behavior & Organization, Elsevier, vol. 202(C), pages 274-306.
    4. Marina Della Giusta & Maria Laura Di Tommaso & Sarah Jewell & Francesca Bettio, 2021. "Quashing demand or changing clients? Evidence of criminalization of sex work in the United Kingdom," Southern Economic Journal, John Wiley & Sons, vol. 88(2), pages 527-544, October.
    5. Freylejer, Leandro & Orr, Scott, 2023. "Import substitution in illicit methamphetamine markets," Journal of International Economics, Elsevier, vol. 140(C).
    6. Elisa Benedetti & Giuliano Resce & Paolo Brunori & Sabrina Molinaro, 2021. "Cannabis Policy Changes and Adolescent Cannabis Use: Evidence from Europe," IJERPH, MDPI, vol. 18(10), pages 1-16, May.
    7. Abbate Nicolás & Cabral Juan Andrés, 2023. "Reassessing a cocaine shock: a contrary narrative from Rabo de Peixe," Asociación Argentina de Economía Política: Working Papers 4628, Asociación Argentina de Economía Política.

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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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