In recent years, the debate over the costs and benefits of legalizing the use of currently illicit drugs has been revived. This paper attempts to inform this debate by providing some evidence on the effects of illicit drug prices and legal sanctions for drug possession and sale on youth drug use. Data on cocaine and marijuana use by high school seniors are taken from the 1982 and 1989 Monitoring the Future surveys. Site-specific data on cocaine prices and legal sanctions for the possession and sale, manufacture or distribution of cocaine and marijuana are added to the survey data. The results indicate that youth cocaine demand is sensitive to price, with average past year and past month cocaine demand elasticities of -1.28 and -1.43, respectively. In addition, the estimates suggest that increased sanctions for the possession of cocaine and marijuana have a negative and statistically significant impact on youth cocaine and marijuana use. However, the magnitude of these estimates implies that very large increases in the monetary fines that can be imposed for first offense possession would be necessary to achieve meaningful reductions in use. Finally, sanctions for the sale, manufacture or distribution of cocaine and marijuana were found to have little impact on youth cocaine and marijuana use.
*Published: This paper was subsequently published as The Demand for Cocaine and Marijuana by Youth, Frank J. Chaloupka, Michael Grossman, John A. Tauras, in NBER book The Economic Analysis of Substance Use and Abuse: An Integration of Econometrics and Behavioral Economic Research (1999)
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