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Identifying Demand Responses to Illegal Drug Supply Interdictions

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  • Scott Cunningham
  • Keith Finlay

Abstract

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.

Suggested Citation

  • Scott Cunningham & Keith Finlay, 2016. "Identifying Demand Responses to Illegal Drug Supply Interdictions," Health Economics, John Wiley & Sons, Ltd., vol. 25(10), pages 1268-1290, October.
    • Handle: RePEc:wly:hlthec:v:25:y:2016:i:10:p:1268-1290
    DOI: 10.1002/hec.3213
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    1. Are illegal drugs price elastic?
      by Economic Logician in Economic Logic on 2013-04-17 19:03:00

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    4. Abby Alpert & David Powell & Rosalie Liccardo Pacula, 2018. "Supply-Side Drug Policy in the Presence of Substitutes: Evidence from the Introduction of Abuse-Deterrent Opioids," American Economic Journal: Economic Policy, American Economic Association, vol. 10(4), pages 1-35, November.
    5. Freylejer, Leandro & Orr, Scott, 2023. "Import substitution in illicit methamphetamine markets," Journal of International Economics, Elsevier, vol. 140(C).
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    More about this item

    JEL classification:

    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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