Literature review on price changes
Baby booms and drug busts: No effect on frequency of use. The elasticities derived from this study suggest that the total demand for marijuana is actually quite sensitive to changes in price. However, it is important to keep in mind that even if the literature were more complete, it is not clear that one could infer anything about consumption in a legalization regime based on price elasticity estimates generated from a prohibition regime. According to the National Survey of Drug Use and Health NSDUH , the rate at which people report using marijuana in the past month more than doubles from teens under 18 to adults ages , and then declines with age after age The differences are likely due to changes in the exact specification of the model, but again raise the sensitivity of drawing firm conclusions from any one particular study.
Decriminalization in the United States: Support Center Support Center. Recent debates regarding liberalization of marijuana policies often rest on assumptions regarding the extent to which such policy changes would lead to a change in marijuana consumption and by whom. Drug use among police detainees. The effects of prices and policies on the demand for marijuana: The demand for alcohol, tobacco, marijuana and other evils.
Table 1 summarizes the findings with respect to the effects of the monetary price, decriminalization, and the legal risk penalties and police enforcement of marijuana on the decision to use marijuana among youth. As age still various considerably even among the regular user population, we indicate in an extra column of Table 2 the age of the sample considered.
The demand for alcohol: The effects of decriminalization are less clear from the literature, which may be due a combination of weak analytic approaches, the non-uniqueness of this policy in terms of actual penalties faced by users, and the apparent lack of knowledge about these policies.
The problem with using annual prevalence rates rather than past month prevalence rates to consider the responsiveness of regular users is that annual prevalence rates combine the behavior of new initiates and more persistent users, particularly for individuals past the age of initiation. Office of National Drug Control Policy; The literature suggests that policies that reduce the price of marijuana by 10 percent therefore, will lead to a percent increase in the number of new marijuana users among youth, all else equal.
Ramful P, Zhao X. The Journal of Law and Economics. The economics of smoking. This paper reviews the economics literature assessing the responsiveness of consumption to changes in price and enforcement risk and explicitly considers how this responsiveness varies by different user groups.
Grossman linked external price data that adjusted for average potency to arrestee self-reported use data and found statistically significant price effects.
Second, while changes in the monetary price of marijuana may be important for understanding how much consumption will change, other aspects of the change in policy, including the reduction in the legal risk and perceived harm of use, will also be important predictors of how much consumption actually changes. Chaloupka FJ, Grossman M. Our thesis is that consumption by each of these groups will be differentially impacted by price changes and thus prevalence rates by themselves are imperfect indicators of real consumption changes caused by price changes.
Journal of Health Economics. A number of limitations remain in our current understanding of the impact of price on marijuana use. Drug and Alcohol Dependence. DeSimone and Farrelly , for example, estimated models of annual prevalence and frequency of marijuana use among year olds. The research reviewed here provides insights into discussions regarding legalization. Elsevier; Amsterdam, the Netherlands: Clearly, this is a very imprecise measure of regular marijuana users and could easily capture new initiates as well.
As demand for most goods is downward sloping, the price elasticity of demand is generally negative indicating that when price goes up consumption goes down. Review of Law and Economics. Their estimate of the annual price elasticity of demand was Summary measures from initiation suggest that for every 10 percent decline in the monetary price of marijuana, there will be an increase of 3 to 5 percent in new marijuana users prior to the age of 18, an increase of 2.
Open in a separate window. This paper contributes to the existing economic and policy literatures on the demand for marijuana and the probable impact of policy on consumption by clearly differentiating the findings from the literature regarding the price elasticity of demand by different types of user groups. Participation in marijuana, cocaine and heroin consumption in Australia: Smoking, drinking and drug use among American high school seniors: Table 2 provides a summary of some key studies that have considered various components of the full price on consumption among young adults.
Williams J, Mahmoudi P. However, the findings cannot provide any sort of precise insight regarding how much consumption might change in response to a change in price or liberalization policy. In particular, it is clear from the literature that the demand for marijuana is responsive to changes in both its monetary price and the nonpecunary aspects of price, particularly those pertaining to legal risk.
The potential for using excise taxes to reduce smoking. University of Chicago Press; Chicago and London: Some estimates of the price and expenditure elasticities of demand for marijuana among U. Reframing health behavior change with behavioral economics. The first study to examine the price elasticity of demand for marijuana examined a population of American undergraduate students.
Third, evidence presented here suggests that all aspects of marijuana use could change in response to this policy change, with more new initiates, more regular users, and people using for longer periods of time.
In most cases, the impact of the legal risk on prevalence is generally small, and when frequency of marijuana use is examined, legal risks are generally insignificant. Assessing the perceptual component of deterrence theory. The joint demand for cigarettes and marijuana. Alcohol and marijuana use among college students: In doing so, it becomes readily apparent that various groups might respond differentially to a policy change. Alcohol, marijuana and American youth: Risky behavior among youth: See other articles in PMC that cite the published article.
Other studies have examined marijuana use among arrestees. A meta-analysis of illicit drug demand. Bickel W, Vuchinich R, editors. Cameron L, Williams J. Lindgren B, Grossman M, editors. What little evidence we have on heavy users suggests price elasticities substantially larger than those estimated from past month users. Markowitz S, Tauras J. Review of Economics of the Household. If the goal is to understand factors influencing marijuana initiation, then one must start by looking at use among adolescents.
There is also evidence from international work demonstrating the sensitivity of consumption to changes in the price of marijuana when annual measures of use are used.