More than Joints: Multi-Substance Use, Choice Limitations, and Policy Implications

Michelle Sovinsky, Liana Jacobi, Alessandra Allocca and Tao Sun
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Michelle Sovinsky: University of Mannheim
Liana Jacobi: University of Melbourne
Alessandra Allocca: LMU Munich

No 487, Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition

Abstract: As illicit substances move into the legal product space, substitution patterns with legal products become more salient. In particular, marijuana legalization may have implications for the use of other legal “sin” goods. We estimate a structural model of multi-product use of illegal and legal substances considering joint use, limited access to illicit products, and persistence in use. We focus on a young person’s choice to consume marijuana, alcohol or cigarettes (and possible combinations), and we find that sin goods are complements. Furthermore, our findings emphasize the necessity of accounting for joint consumption and access to obtain correct price sensitivity estimates. Post-legalization, youth marijuana use would increase from 25% to 37%. However, counterfactual results show that a combination of (reasonable) tax increases on all goods along with enforcement against illegal use can potentially revert use to pre-legalization levels. The earlier the tax increases are implemented the more effective they are at curbing future use. Our results inform the policy debate regarding the impact of marijuana legalization on the long-term use of sin goods.

Keywords: complementarity, marijuana legalization, limited choice sets, data restrictions, discrete choice models; marijuana legalization; limited choice sets; data restrictions; discrete choice models (search for similar items in EconPapers)
JEL-codes: C11 C35 D12 K42 L15 L66 (search for similar items in EconPapers)
Date: 2023-12-19
New Economics Papers: this item is included in nep-dcm and nep-law
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