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by Henry Saffer Frank Chaloupka National
Bureau of Economic Research, Inc. The purpose of this paper
is to estimate the effects of heroin prices, cocaine prices and marijuana
decriminalization on the demand for these three drugs, respectively. There
are few prior empirical studies in this area because data have been difficult
to acquire. This paper makes use of newly available data on drug prices
and is the first to link these data to a sample of 49,802 individuals
from the National Household Survey of Drug Abuse. The new drug price data
comes from the Drug Enforcement Agency. The results provide empirical
evidence that drug use is more price responsive than has been previously
thought. The results show that the participation price elasticity for
heroin is about -.90 to -.80 and that the participation price elasticity
for cocaine is about - .55 to -.36. Marijuana decriminalization was also
found to increase the probability of marijuana participation by about
4 to 6 percent. The price elasticity for heroin is estimated at about
-1.80 to -1.60 and for cocaine at about -1.10 to -.72. It is estimated
that legalization would lead to about a 100 percent increase in the quantity
of heroin consumed and about a 50 percent increase in the quantity of
cocaine consumed.
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