De Economist

, Volume 154, Issue 4, pp 491–516 | Cite as

Drug Demand – Initiation, Continuation and Quitting

Article
First Online:

Summary

As illicit drug use inflicts considerable harm on users, non-using persons and society, there is an urgent need to better understand demand. Unlawfulness and addictiveness separate the consumption of narcotic drugs from the consumption of other commodities. This paper reviews economic approaches to the task of analysing drug consumption and discusses some recent contributions to the field. We find it useful to apply a threefold division to a user’s career: the initiation phase, the continuation phase and the quitting phase. First, however, we present an analysis of drug injectors’ heroin demand based on a large set of personal interviews (n = 2882) and illustrate some of the problems affecting empirical studies in this field. An estimated price elasticity of −0.77 and income elasticity of 0.56 suggest a high level of responsiveness to economic incentives among heavy drug users.

Keywords

drug dealing heroin illicit drugs literature review price elasticity switching regression model 

JEL Code(s)

C21 D12 I18 
This is a preview of subscription content, log in to check access.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Ainslie G. (1992), Picoeconomics. Cambridge, Cambridge University PressGoogle Scholar
  2. Atkinson A. (1974), ‘Smoking and the Economics of Government Intervention’. In: Perlman M. (eds), The Economics of Health and Medical Care. New York, Macmillan, pp. 428–441Google Scholar
  3. Baltagi B.H., Levin D. (1986), ‘Estimating Dynamic Demand for Cigarettes Using Panel Data: The Effects of Bootlegging, Taxation, and Advertising Reconsidered’. Review of Economics and Statistics 68(1): 148–156CrossRefGoogle Scholar
  4. Barthold T., Hochman H.M. (1988), ‘Addiction as Extreme Seeking’. Economic Inquiry 26, 89–106Google Scholar
  5. Becker G.S. (1965), ‘A Theory of the Allocation of Time’. Economic Journal 75, 493–517CrossRefGoogle Scholar
  6. Becker G.S., Mulligan C.B. (1997), ‘The Endogenous Determination of Time Preference’. Quarterly Journal of Economics 112(3): 729–758CrossRefGoogle Scholar
  7. Becker G.S., Murphy K.M. (1988), ‘A Theory of Rational Addiction’. Journal of Political Economy 96, 675–700CrossRefGoogle Scholar
  8. Becker G.S., Grossman M., Murphy K.M. (1994), ‘An Empirical Analysis of Cigarette Addiction’. American Economic Review 84(3): 396–418Google Scholar
  9. Beenstock M., Rahav G. (2002), ‘Testing Gateway Theory: Do Cigarette Prices Affect Illicit Drug Use?’. Journal of Health Economics 21, 679–698CrossRefGoogle Scholar
  10. Bernstein D.P., Fink L. (1998), Childhood Trauma Questionnaire A Retrospective Self-Report. The Psychological Corporation, Harcourt Brace and Company, USGoogle Scholar
  11. Bretteville-Jensen A.L. (1999a), ‘Gender, Heroin Consumption and Economic Behaviour’. Health Economics 8(5): 379–389CrossRefGoogle Scholar
  12. Bretteville-Jensen A.L. (1999b), ‘Addiction and Discounting’. Journal of Health Economics 18(4): 393–407CrossRefGoogle Scholar
  13. Bretteville-Jensen A.L., Biørn E.(2003), ‘Heroin Consumption, Prices and Addiction: Evidence from Self-Reported Panel Data’. The Scandinavian Journal of Economics 105(4): 661–679CrossRefGoogle Scholar
  14. Bretteville-Jensen A.L., Biørn E. (2004), ‘Do Prices Count? A Micro-Econometric Study of Illicit Drug Consumption Based on Self-Reported Data’. Empirical Economics 29(3): 673–695CrossRefGoogle Scholar
  15. Bretteville-Jensen A.L., Melberg and H.O. Jones A.M. (2005), Sequential Patterns of Drug use Initiation – can we Believe in the Gateway Theory? HEDG working paper no 05/09, Department of Economics and Related Studies, University of York, UK.Google Scholar
  16. Chaloupka F.J. (1991), ‘Rational Addictive Behavior and Cigarette Smoking’. Journal of Political Economy 99(4): 722–742CrossRefGoogle Scholar
  17. Chaloupka F.J., Warner K. (2000), ‘The Economics of Smoking’. In: Culyer A.J., Newhouse J.P. (eds) Handbook of Health Economics. Amsterdam, Elsevier, pp. 1539–1627Google Scholar
  18. Clark and A.E. Y. Lohéac (2005), ‘It Wasn’t Me, it was Them!’ Social Influence in Risky Behaviour by Adolescents, Working Paper, TEAM, University of Paris.Google Scholar
  19. Cook P., Moore M. (2000), ‘Alcohol’. In: Culyer A.J., Newhouse J.P. (eds), Handbook of Health Economics, (eds) Amsterdam, Elsevier, pp. 1629–1673Google Scholar
  20. Contoyannis P., Jones A.M. (2000), ‘Addiction and Adjustment Costs: An Empirical Implementation’. In: Grossman, Hsieh (eds), Economic Analysis of Substance Use and Abuse. London, Edward ElgarGoogle Scholar
  21. Dave D. (2006), ‘The Effects of Cocaine and Heroin Price on Drug-Related Emergency Department Visits’. Journal of Health Economics 25, 311–333CrossRefGoogle Scholar
  22. DeCicca P., Kenkel D., Mathios A. (2002), ‘Putting Out the Fire: Will Higher Taxes Reduce the Onset of Youth Smoking?’. Journal of Political Economy 110(10): 144–169CrossRefGoogle Scholar
  23. DeSimone J. (1998), ‘Is Marijuana a Gateway Drug?’. Eastern Economic Journal 24, 149–164Google Scholar
  24. DeSimone J., Farrelly M.C. (2003), ‘Price and Enforcement Effects on Cocaine and Marijuana Demand’. Economic Inquiry 41(1): 98–115CrossRefGoogle Scholar
  25. DiNardo J., Lemieux T. (2001), ‘Alcohol, Marijuana and American Youth: The Unintended Consequences of Government Regulation’. Journal of Health Economics 20, 991–1010CrossRefGoogle Scholar
  26. Douglas S. (1998), ‘The Duration of the Smoking Habit’. Economic Inquiry 36, 49–64Google Scholar
  27. Douglas S., Hariharan G. (1994), ‘The Hazard of Starting Smoking: Estimates from a Split Population Duration Model’. Journal of Health Economics 13, 213–230CrossRefGoogle Scholar
  28. Farnworth M.G. (2006), ‘What Motivates Daily Cigarette Smokers to Quit? Retrospective Annual Discrete Duration Analysis’. Substance Use and Misuse 41, 533–554CrossRefGoogle Scholar
  29. Ferguson B.S. (2006), ‘Economic Modelling of the Rational Consumption of Addictive Substances’. Substance Use and Misuse 41, 573–603CrossRefGoogle Scholar
  30. Fergusson D.M., Swain-Campbell N.R., Horwood L.J. (2002), ‘Deviant Peer Affiliations, Crime and Substance Use: A Fixed Effects Regression Analysis’. Journal of Abnormal Child Psychology 30(4): 419–430CrossRefGoogle Scholar
  31. Fergusson D.M., Boden N.R.J.M., Horwood L.J. (2006), ‘Cannabis Use and Other Illicit Drug Use: Testing the Cannabis Gateway Hypothesis’. Addiction 101, 556–569CrossRefGoogle Scholar
  32. Forster M., Jones A.M. (2001), ‘The Role of Tobacco Taxes in Starting and Quitting Smoking: Duration Analyses of British Data’. Journal of the Royal Statistical Society, Series A, Part 3. 164, 517–547Google Scholar
  33. Gallett C.A., List J.A. (2003), ‘Cigarette Demand: A Meta-Analysis of Elasticities’. Health Economics 12, 821–835CrossRefGoogle Scholar
  34. Gaviria A., Raphael S. (2001), ‘School-based Peer Effects and Juvenile Behaviour’. The Review of Economics and Statistics 83(2): 257–268CrossRefGoogle Scholar
  35. Greene W.H. (2004), Econometric Analysis 5th edn. NJ, Prentice HallGoogle Scholar
  36. Grossman M. (2005), ‘Individual Behaviours and Substance Use: The Role of Price’. In: Lindgren B., Grossman M. (eds), Substance Use: Individual Behaviour, Social Interactions, Markets and Politics. Elsevier Amsterdam, The NetherlandsGoogle Scholar
  37. Grosman M., Chaloupka F.J. (1998), ‘The Demand for Cocaine by Young Adults: A Rational Addiction Approach’. Journal of Health Economics 17, 427–474CrossRefGoogle Scholar
  38. Grossman M., Chaloupka F.J., Sirtalan I. (1998), ‘An Empirical Analysis of Alcohol Addiction: Results from the Monitoring the Future Panels’. Economic Inquiry 36(1): 39–48Google Scholar
  39. Houthakker H.S., Taylor L.D. (1966), Consumer Demand in the United States, 1929–1970 Analyses and Projections. Cambridge MA, Harvard University PressGoogle Scholar
  40. Johnson J., Oskanen E.H. (1977), ‘Estimation of Demand for Alcoholic Beverages in Canada from Pooled Time Series and Cross Sections’. Review of Economics and Statistics 59(1): 113–118CrossRefGoogle Scholar
  41. Jones A.M. (1989), ‘A Double-Hurdle Model of Cigarette Consumption’. Journal of Applied Econometrics 4, 23–39Google Scholar
  42. Jones A.M. (1994), ‘Health, Addiction, Social Interaction and the Decision to Quit Smoking’. Journal of Health Economics 13, 93–110CrossRefGoogle Scholar
  43. Jones A.M. (1999), ‘Adjustment Costs, Withdrawal Effects, and Cigarette Addiction’. Journal of Health Economics 18, 125–137CrossRefGoogle Scholar
  44. Jones A.M., Labeaga J.M. (2003), ‘Individual Heterogeneity and Censoring in Panel Data Estimates of Tobacco Expenditure’. Journal of Applied Econometrics 18(2): 157–177CrossRefGoogle Scholar
  45. Kandel D.B. (1975), ‘Stages in Adolescent Involvement in Drug Use’. Science 190, 912–914CrossRefGoogle Scholar
  46. Kandel D.B, Yamaguchi K. (2002), ‘Stages of Drug Involvement in the US Population’. In: Kandel D.B. (eds) Stages and Pathways of Drug Involvement; Examining the Gateway Hypothesis. New York, Cambridge University Press, pp. 65–89Google Scholar
  47. Keeler T.E., Hu T.-W., Barnett P.G., Manning W.G. (1993), ‘Taxation, Regulation, and Addiction: A Demand Function for Cigarettes Based on Time-Series Evidence’. Journal of Health Economics 12, 1–18CrossRefGoogle Scholar
  48. Keeler T.E., Marciniak M., Hu T.-W. (1999), ‘Rational Addiction and Smoking Cessation: An Empirical Study’. Journal of Socio-Economics 28, 633–643CrossRefGoogle Scholar
  49. Kidd M.P., Hopkins S. (2004), ‘The Hazards of Starting and Quitting Smoking: Some Australian Evidence’. The Economic Record 80, 177–192CrossRefGoogle Scholar
  50. Kirkby K.N., Petry N.M. (2004), ‘Heroin and Cocaine Abusers have Higher Discount Rates for Delayed Rewards than Alcoholics or Non-drug-using Controls’. Addiction 99(4): 461–471CrossRefGoogle Scholar
  51. Koch J.V., Grupp S.E. (1973), ‘Police and Illicit Drug Markets: Some Economic Considerations’. British Journal of Addiction 68, 351–362CrossRefGoogle Scholar
  52. Lancaster K.J. (1966), ‘A New Approach to Consumer Theory’. Journal of Political Economy 74, 132–157CrossRefGoogle Scholar
  53. Laporte A. (2006), ‘Price Responsiveness of Demand for Cigarettes: Does Rationality Matter?’. Substance Use and Misuse, 41, 511–531CrossRefGoogle Scholar
  54. Lundborg P. (2006), ‘Having the Wrong Friends? Peer Effects in Adolescent Substance Use’. Journal of Health Economics 25, 214–233CrossRefGoogle Scholar
  55. Manski C.F. (2000), ‘Economic Analysis of Social Interactions’. Journal of Economic Perspectives, 2000 14(3): 115–36CrossRefGoogle Scholar
  56. McLellan A.T., Kushner H., Metzger D., Peters R. (1992), ‘The Fifth Edition of the Addiction Severity Index’. Journal of Substance Abuse Treatment 9(3): 199–213CrossRefGoogle Scholar
  57. Melberg H.O. (2003), ‘Social Interaction and Drug Use’. In: Vuchinich R.E., Heather N. (eds), Choice, Behavioural Economics and Addiction. Pergamon, London, pp. 318–331Google Scholar
  58. Messinis G. (1999), ‘Habit Formation and the Theory of Addiction’. Journal of Economic Surveys 13(4): 417–442CrossRefGoogle Scholar
  59. Michaels R. (1988), ‘Addiction, Compulsion, and the Technology of Consumption’. Economic Inquiry 26, 74–88Google Scholar
  60. Model K.E. (1993), ‘The Effect of Marijuana Decriminalization on Hospital Emergency Room Drug Episodes: 1975–1978’. Journal of the American Statistical Association 88, 737–747CrossRefGoogle Scholar
  61. Moene K.O. (1999), ‘Addiction and Social Interaction’. In: Elster J., Skog O.-J. (eds), Getting Hooked. Rationality and Addiction. Cambridge, Cambridge University Press, pp.30–46Google Scholar
  62. Nisbet C.T., Vakil F. (1972), ‘Some Estimates of Price and Expenditure Elasticities of Demand for Marijuana Among U.C.L.A. Students’. The Review of Economics and Statistics 54, 473–475CrossRefGoogle Scholar
  63. Nicolás A.L. (2002), ‘How Important are Tobacco Prices in the Propensity to Start and Quit Smoking? An analysis of smoking histories from the Spanish National Health Survey’. Health Economics 11, 521–535CrossRefGoogle Scholar
  64. Olekalns N., Bradsley P. (1996), ‘Rational Addiction to Caffeine: An Analysis of Coffee Consumption’. Journal of Political Economy 104(5): 1100–1104CrossRefGoogle Scholar
  65. Pacula R.L. (1998), ‘Does Increasing Beer Tax Reduce Marijuana Consumption?’. Journal of Health Economics 17, 557–85CrossRefGoogle Scholar
  66. Pacula R.L., Chaloupka F. (2001), ‘The Effects of Macro-level Interventions on Addictive Behaviour’. Substance Use and Misuse 36, 1901–1922CrossRefGoogle Scholar
  67. Pekurinen M. (1989), ‘The Demand for Tobacco Products in Finland’. British Journal of Addiction 84, 1183–1192CrossRefGoogle Scholar
  68. Pitkänen T., Lyyra A.-L., L-Pulkkinen (2005), ‘Age of Onset of Drinking and the Use of Alcohol in Adulthood; A Follow-up Study from Age 8–42 for Females and Males’. Addiction 100 (5): 652–661CrossRefGoogle Scholar
  69. Pollak R. (1970), ‘Habit Formation and Dynamic Demand Functions’. Journal of Political Economy 78, 745–763CrossRefGoogle Scholar
  70. Pudney S. (2003), ‘The Road to Ruin? Sequences of initiation to Drug Use and Crime in Britain’. Economic Journal 113, 182–198CrossRefGoogle Scholar
  71. Quigley B.M., Collins R.L. (1999), ‘The Modeling of Alcohol Consumption: A Meta- Analytic Review’. Journal of Studies on Alcohol 1: 90–98Google Scholar
  72. Riegel J.S., Evans W.E. (2001), ‘Cigarette Taxes and Smoking During Pregnancy’. American Journal of Public Health 91(11): 1851–1856CrossRefGoogle Scholar
  73. Rottenberg S. (1968), ‘The Clandestine Distribution of Heroin, its Discovery and Suppression’. Journal of Political Economy 76(1): 78–90CrossRefGoogle Scholar
  74. Saffer H., Chaloupka F.J. (1999), ‘The Demand for Illicit Drugs’. Economic Inquiry 37(3): 401–411CrossRefGoogle Scholar
  75. Saffer H., Chaloupka F.J., Dave D. (2001), ‘State Drug Control Spending and Illicit Drug Participation’. Contemporary Economic Policy 19(2): 150–161CrossRefGoogle Scholar
  76. Silverman L.P., Spruill N.L. (1977), ‘Urban Crime and the Price of Heroin’. Journal of Urban Economics 4: 80–103CrossRefGoogle Scholar
  77. Skog O.-J. (1997), ‘The Strength of Weak Will’. Rationality and Society 6(2): 245–269Google Scholar
  78. Stigler G.J, Becker G.S. (1977), ‘De Gustibus Non Est Disputandum’. American Economic Review 67(2): 76–90Google Scholar
  79. Strotz R. (1956), ‘Myopia and Inconsistency in Dynamic Utility Maximization’. Review of Economic Studies 23, 165–180Google Scholar
  80. Suranovic S., Goldfarb R., Leonard T. (1999), ‘An Economic Theory of Cigarette Addiction’. Journal of Health Economics. 18, 1–29CrossRefGoogle Scholar
  81. Tauras J. (2001), The Transition to Smoking Cessation: Evidence from Multiple Failure Duration Analysis, NBER working paper, no. 7412, Washington, DC.Google Scholar
  82. Tauras J. (2004), ‘Public Policy and Smoking Cessation Among Young Adults in the United States’. Health Policy, 68, 321–332CrossRefGoogle Scholar
  83. Tauras J. and Chaloupka F. (1999), Determinants of Smoking Cessation: An Analysis of Young Adult Men and Women, NBER working paper, no. 7262, Washington, DC.Google Scholar
  84. Thaler R., Sheffrin H. (1981), ‘An Economic Theory of Self-Control’. Journal of Political Economy 89, 392–406CrossRefGoogle Scholar
  85. Thies C.F., Register C.A. (1993), ‘Decriminalization of Marijuana and the Demand for Alcohol, Marijuana and Cocaine’. The Social Science Journal 30(4): 385–399CrossRefGoogle Scholar
  86. Ours J. van (2003), ‘Is Cannabis a Stepping-Stone for Cocaine?’. Journal of Health Economics 22(4): 539ΓÇô554CrossRefGoogle Scholar
  87. Ours J. van (2006), ‘Dynamics in the Use of Drugs,’ forthcoming in Health Economics.Google Scholar
  88. Ours J. van and Williams J. (2005), ‘Cannabis Prices and Dynamics of Cannabis Use,’ Discussion Paper No 05ΓÇô052, Center for Economic Research, Tilburg University.Google Scholar
  89. Williams J. (2004), ‘The Effects of Price and Policy on Marijuana Use: What can be Learned form the Australian Experience?’. Health Economics 13, 123–137CrossRefGoogle Scholar
  90. Williams J., Pacula R.L., Chaloupka F.J., Wechsler H. (2006), ‘College Students’ Use of Cocaine’. Substance and Misuse 41, 489–509CrossRefGoogle Scholar
  91. Winston G.C. (1980), ‘Addiction and Backsliding: A Theory of Compulsive Consumption’. Journal of Economic Behaviour and Organization 1, 295–324CrossRefGoogle Scholar
  92. Yen S.T., Jones A.M. (1996), ‘Individual Cigarette Consumption and Addiction: A Flexible Limited Dependent Variable Approach’. Health Economics 5, 105–117CrossRefGoogle Scholar
  93. Young T. (1983), ‘The Demand for Cigarettes: Alternative Specifications of Fujii’s Model’. Applied Economics 15, 203–211Google Scholar

Copyright information

© Springer Science+Business Media, LLC 2006

Authors and Affiliations

  1. 1.Norwegian Institute for Alcohol and Drug Research (SIRUS)OsloNorway

Personalised recommendations