Optimal Drug Policy in Low-Income Neighborhoods

Sheng-Wen Chang, N. Edward Coulson, Ping Wang

NBER Working Paper No. 9248
Issued in October 2002
NBER Program(s):Health Economics

Part of the debate over the control of drug activity in cities is concerned with the effectiveness of implementing demand- versus supply-side drug policies. This paper is motivated by the relative lack of research providing formal economic underpinning for the implementation of either policy. We construct a simple model of drug activity, in which the drug price and the distribution of population in a community are determined according to a career choice rule and a predetermined drug demand. Three potential government objectives are considered. We find that both demand- and supply-side policies have theoretical support under different community conditions. While the demand-side policy discourages active drug sellers, the supply-side policy has an additional drug-dealing replacement effect on inducing potential entry of drug dealers. In low-income neighborhoods, demand-side policy is more effective if the drug problem is more sever or if the government objective is to deter dealer entry or to promote community's aggregate income rather than minimizing active drug selling.

download in pdf format
   (351 K)

email paper

The NBER Bulletin on Aging and Health provides summaries of publications like this.  You can sign up to receive the NBER Bulletin on Aging and Health by email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w9248

Published: SHENG-WEN CHANG & N. EDWARD COULSON & PING WANG, 2016. "Optimal Drug Policy in Low-Income Neighborhoods," Journal of Public Economic Theory, vol 18(5), pages 726-751. citation courtesy of

Users who downloaded this paper also downloaded* these:
Donohue, Ewing, and Peloquin w16776 Rethinking America's Illegal Drug Policy
Becker, Murphy, and Grossman w10976 The Economic Theory of Illegal Goods: The Case of Drugs
Kuziemko and Levitt w8489 An Empirical Analysis of Imprisoning Drug Offenders
Miron w9689 The Effect of Drug Prohibition on Drug Prices: Evidence from the Markets for Cocaine and Heroin
Pacula, Grossman, and Chaloupka Marijuana and Youth
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us