Demographic Differentials in the Demand for Alcohol and Illicit Drugs

The purpose of this paper is to estimate demographic differentials in alcohol and illicit drug use, participation, own price effects and cross price effects. This paper uses a data set of over 49,000 individuals from the National Household Survey of Drug Abuse and links drug and alcohol prices and policies to the individual records. The size of this data set makes it possible to estimate use, participation and demand curves for specific demographic groups. Public policies designed to reduce substance abuse have been oriented towards increasing the price of alcohol and illicit drugs. Little, however, is known about the relative responsiveness of various demographic groups to these policies. The data show that racial and ethnic minorities consume more cocaine, but consume less or equal amounts of alcohol, marijuana and heroin than the total population. The results also show a consistent pattern of negative own price effects for alcohol and illicit drugs and complimentarity between alcohol and illicit drugs. The own price effects did not differ substantially between demographic groups suggesting that price policies have a similar effect on all demographic groups. The pattern of complimentarity between alcohol and illicit drugs suggest that alcohol taxes also reduce drug use.