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Identifying Demand Responses to Illegal Drug Supply Interdictions
Author(s) -
Cunningham Scott,
Finlay Keith
Publication year - 2016
Publication title -
health economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.55
H-Index - 109
eISSN - 1099-1050
pISSN - 1057-9230
DOI - 10.1002/hec.3213
Subject(s) - heroin , price elasticity of demand , methamphetamine , psychological intervention , addiction , drug , consumption (sociology) , business , supply and demand , enforcement , public economics , drug prices , economics , pharmacology , medicine , psychiatry , microeconomics , law , social science , sociology , political science
Summary Successful supply‐side interdictions into illegal drug markets are predicated on the responsiveness of drug prices to enforcement and the price elasticity of demand for addictive drugs. We present causal estimates that targeted interventions aimed at methamphetamine input markets (‘precursor control’) can temporarily increase retail street prices, but methamphetamine consumption is weakly responsive to higher drug prices. After the supply interventions, purity‐adjusted prices increased then quickly returned to pre‐treatment levels within 6–12 months, demonstrating the short‐term effects of precursor control. The price elasticity of methamphetamine demand is −0.13 to −0.21 for self‐admitted drug treatment admissions and between −0.24 and −0.28 for hospital inpatient admissions. We find some evidence of a positive cross‐price effect for cocaine, but we do not find robust evidence that increases in methamphetamine prices increased heroin, alcohol, or marijuana drug use. This study can inform policy discussions regarding other synthesized drugs, including illicit use of pharmaceuticals. Copyright © 2015 John Wiley & Sons, Ltd.