Working Paper: NBER ID: w10619
Authors: Dhaval Dave
Abstract: This paper estimates the empirical relationship between the prices of cocaine and heroin and objective indicators of use. The set of outcomes is drug related hospital emergency department admissions where cocaine and heroin are cited, for 21 large U.S. metropolitan areas. These outcomes are superior to subjective self-reports, and are policy-relevant since they directly measure a large component of the health-care costs associated with heavy or chronic drug usage. Panel data methodology is used to identify the empirical link between drug prices and these indicators. Results indicate that health consequences associated with heavy or chronic drug use are negatively related to drug prices, an instrument of drug control policy. The elasticity of the probability of a cocaine mention with respect to own-price is estimated at -0.27, and the corresponding elasticity for the probability of a heroin mention is -0.15. The probability of any drug related episode, which captures polydrug usage, is also significantly negatively related to both cocaine and heroin prices. Cross-price effects are consistent with a complementary relationship between cocaine and heroin. Models indicate the presence of negative lagged price effects, confirming the strong addictive aspects of both drugs and the cumulative adverse effects of drug use on health.
Keywords: Cocaine; Heroin; Drug Prices; Emergency Department Visits; Public Policy
JEL Codes: I1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| drug prices (P22) | drug-related emergency department admissions (I19) |
| cocaine prices (P22) | probability of drug-related episodes (C25) |
| heroin prices (P22) | probability of drug-related episodes (C25) |
| cocaine prices (P22) | probability of any drug-related episode (I12) |
| heroin prices (P22) | probability of any drug-related episode (I12) |
| drug prices (P22) | health consequences associated with heavy or chronic drug use (I12) |
| negative lagged price effects (E30) | health consequences associated with drug use (I12) |
| drug prices (P22) | polydrug usage (L65) |