DOI: 10.3886/icpsr06567
title: Estimating the Elasticities of Demand for Cocaine and Heroin with Data from 21 Cities from the Drug Use Forecasting (DUF) Program, 1987-1991
title: Archival Version

description: The objective of this research was to estimate the elasticity of the demand for cocaine and heroin with respect to the price. Price elasticity is the percentage of change in the dependent quantity corresponding to a one-percent change in price. The project involved the development of an econometric model to determine price elasticity, given that national- and city-level data on the consumption of cocaine and heroin are insufficient or nonexistent. The researchers circumvented this lack of data by partitioning the desired elasticity into the product of two elasticities, involving a measurable intermediate quantity whose relationship to the quantity of consumption could be modeled and estimated by measurable techniques. The intermediate quantity used for this project was the fraction of arrestees testing positive for cocaine or heroin as measured by the Drug Use Forecasting (DUF) System. From the Drug Enforcement Administration's (DEA's) System to Retrieve Information from Drug Evidence (STRIDE) data, expected purity was computed by regressing on log quantity and dummy variables for location and quarter. Price series were produced by finding the median standardized price per expected pure gram for each location and quarter. Variables for Part 1, National Data, include year, quarter, standardized prices for a gram of cocaine and a gram of heroin, and expected purity of cocaine and heroin. The Cities Data, Part 2, cover city, year, quarter, number of observations used to compute the median price of cocaine and heroin, standardized prices, and expected purity.
description: Over the last decade, illicit drugs have been increasingly recognized as consumer goods. They are produced, distributed, and retailed in markets that are not entirely unlike the markets for licit goods. This research sought to answer questions such as: (1) By how much will consumption change if prices increase? and (2) If the price of one drug goes up, will users switch to another drug? The answers to these questions have significant policy implications. The primary objective of drug enforcement is to reduce consumption and increase price, using interdiction and source country control. However, the final step of translating the projected increase in price into a reduction in consumption is never satisfactory, because the elasticity of demand is not known. Better knowledge of the extent of substitution would also aid policy planning, analysis, and evaluation. Furthermore, interventions designed to affect price could consider how the difference in the higher fraction of disposable income absorbed by drug purchases for women and youth affect demand. Therefore, the objective of this research was to estimate the elasticity of the quantity of cocaine and heroin consumed with respect to the price.
description: In general, price elasticity is the percentage of change in the dependent quantity corresponding to a one-percent change in price. The focus of this research was the development of an econometric model to determine price elasticity corresponding to the percentage of change in the quantity of cocaine and heroin consumed to the change in the price of cocaine and heroin. The use of the standard econometric model was not feasible, given that national- and city-level data on consumption of cocaine and heroin are insufficient or nonexistent. The researchers adapted the model by partitioning the desired elasticity into the product of two elasticities, involving a measurable intermediate quantity whose relationship to the quantity of consumption could be modeled and estimated by measurable techniques. The intermediate quantity used for this project was the fraction of arrestees testing positive for cocaine or heroin as measured by the Drug Use Forecasting System. From the STRIDE data, cocaine and heroin purchase records were used if (1) they had a positive purity, (2) the amount paid was greater than one dollar, and (3) the total weight was between 0.05 and 40 grams. To partially offset the situations in which cities' records were inadequate to produce reliable quarterly price estimates, data were augmented with records from adjoining cities. Gross outliers were eliminated with a coarse filter based on price per gram, ignoring purity. A second step eliminated observations whose standard price was more than five times farther from the median standardized price for its location and quarter than the median distance. Expected purity was then computed by regressing on log quantity and dummy variables for location and quarter. Price series were produced by finding the median standardized price per expected pure gram of the remaining records for each location and quarter, provided at least five such records existed. If fewer than five records existed, the price was recorded as missing.
description: Variables for Part 1, National Data, include year, quarter, standardized prices for a gram of cocaine and a gram of heroin, and expected purity of cocaine and heroin. The Cities Data, Part 2, cover city, year, quarter, number of observations used to compute the median price of cocaine and heroin, standardized prices, and expected purity.
description: ICPSR data undergo a confidentiality review and are altered when necessary to limit the risk of disclosure. ICPSR also routinely creates ready-to-go data files along with setups in the major statistical software formats as well as standard codebooks to accompany the data. In addition to these procedures, ICPSR performed the following processing steps for this data collection: Standardized missing values.; Checked for undocumented or out-of-range codes..
description: Presence of Common Scales: None.
description: Response Rates: Not applicable.
description: Datasets: 
 
 DS0: Study-Level Files 
 DS1: National Data 
 DS2: Cities Data
description: Arrestee Drug Abuse Monitoring (ADAM) Program/Drug Use Forecasting (DUF) Series
description: Users are encouraged to obtain a copy of the technical report on this project that describes in detail the model that was developed the relationship between quantity consumed and the fraction of arrestees testing positive. Further information about the DUF program is available in various NIJ publications and can be obtained from the National Criminal Justice Reference Service (NCJRS).
description: Illicit cocaine and heroin purchases in the United States.
description: (1) Arrestees testing positive for cocaine or heroin from 21 cities in the DUF data, (2) all purchases and seizures of cocaine or heroin examined by the DEA laboratories.