Measuring the Market Size for Cannabis: A New Approach Using Forensic Economics

Imran Rasul and Matthias Parey

No 12161, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Quantifying the market size for cannabis is important given vigorous policy debates about how to intervene in this market. We develop a new approach to measuring the size of the cannabis market using forensic economics. The key insight is that cannabis consumption often requires the use of complementary legal inputs: roll-your-own tobacco and rolling papers. The forensic approach specifies how legal and illegal inputs are combined in the production of hand-rolled cigarettes and cannabis joints. These input relationships, along with market adding-up conditions, can then be used to infer the size of the cannabis market. We prove proof-of-concept that this approach can be readily calibrated using: (i) point-of-sales data on the legal inputs of roll-your-own tobacco and rolling papers; (ii) input parameter estimates drawn from a wide-ranging interdisciplinary evidence base. We then implement the approach using data from 2008-9. For those years, the forensic estimates for the UK cannabis market are near double those derived from standard demand-side approaches. We make precise what drives the measurement gap between methods by establishing: (i) the parameter adjustments needed in demand-side approaches to match the forensic measure; (ii) the changes in methodology to the forensic approach needed to match the demand-side estimate. Our analysis develops an agenda on measurement and data collection that allows for credible cost-benefit analysis of policy interventions in illicit drug markets.

JEL-codes: C80 K42 (search for similar items in EconPapers)
Date: 2017-07
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Citations: View citations in EconPapers (6)

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Journal Article: Measuring the Market Size for Cannabis: A New Approach Using Forensic Economics (2021)
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