Identifying Demand Responses to Illegal Drug Supply Interdictions

Scott Cunningham and Keith Finlay

No 1312, Working Papers from Tulane University, Department of Economics

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.

Keywords: illegal drugs; addiction; demand; substitution; War on Drugs; methamphetamine (search for similar items in EconPapers)
JEL-codes: I12 I18 K42 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2013-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://repec.tulane.edu/RePEc/pdf/tul1312.pdf First Version, March 2013 (application/pdf)

Related works:
Journal Article: Identifying Demand Responses to Illegal Drug Supply Interdictions (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:tul:wpaper:1312

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