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Estimating Elasticities of Demand for Cocaine and Heroin With Data From the Drug Use Forecasting System

NCJ Number
Date Published
J. P. Caulkins
This study attempts to determine how much drug consumption will change if prices increase. Data set archived by the NIJ Data Resources Program at the National Archive of Criminal Justice Data, located at URL http://www.icpsr.umich.edu/nacjd.
Elasticities of demand for cocaine and heroin are estimated as the product of the elasticity of demand with respect to an intermediate variable and the elasticity of the intermediate variable with respect to price. The intermediate variable used in this study was the percent of arrestees testing positive for the drug. The demand for cocaine, at least, appeared to be substantially more responsive to price changes than had previously been supposed. The study used data from the National Institute of Justice's Drug Use Forecasting system and the Drug Enforcement Administration's System to Retrieve Information from Drug Evidence. The report describes the analytical strategy, the data, and results; discusses cross-elasticities of demand (the percentage change in consumption of one drug that occurs when the price of another drug increases by 1 percent), and assesses the risk of substitution; and reviews the implications of study findings. Notes, references, tables
Date Created: December 17, 2008