Table Of ContentDevelopments in Health Economics and Public Policy11
Pratima Ramful Srivastava
Recreational Drug
Consumption
An Economic Perspective
Developments in Health Economics
and Public Policy
Volume 11
Series Editors
H.E.Frech III, UC SantaBarbara, USA
PeterZweifel, UniversityofZurich,Switzerland
Forfurthervolumes:
http://www.springer.com/series/6039
Pratima Ramful Srivastava
Recreational
Drug Consumption
An Economic Perspective
123
PratimaRamfulSrivastava
SchoolofEconomics,Financeand
Marketing
RMITUniversity
Melbourne
Victoria
Australia
ISSN0927-4987
ISBN978-3-319-02404-2 ISBN978-3-319-02405-9(eBook)
DOI10.1007/978-3-319-02405-9
SpringerChamHeidelbergNewYorkDordrechtLondon
LibraryofCongressControlNumber:2013956427
(cid:2)c SpringerInternationalPublishingSwitzerland2013
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Contents
1 Introduction .................................................................. 1
1.1 BackgroundandMotivation............................................ 1
1.2 ObjectivesoftheBook.................................................. 4
1.3 OutlineoftheBook..................................................... 6
2 LiteratureReview............................................................ 9
2.1 Introduction ............................................................. 9
2.2 Economists’FormulationofDrugConsumption...................... 10
2.3 DrugConsumption...................................................... 11
2.3.1 LicitDrugConsumption........................................ 12
2.3.2 IllicitDrugConsumption....................................... 18
2.4 Cross-DrugRelationships .............................................. 19
2.5 EconometricApproaches............................................... 21
2.6 DataIssues .............................................................. 22
2.7 Summary ................................................................ 23
3 AnOverviewofRecreationalDrugConsumptioninAustralia......... 25
3.1 Introduction ............................................................. 25
3.2 TheCostsofRecreationalDrugUse................................... 27
3.3 Data:TheNationalDrugStrategyHouseholdSurvey ................ 28
3.4 LicitDrugs .............................................................. 30
3.4.1 Alcohol.......................................................... 30
3.4.2 Tobacco ......................................................... 34
3.5 IllicitDrugs.............................................................. 37
3.5.1 Marijuana ....................................................... 37
3.5.2 Amphetamines.................................................. 39
3.5.3 Cocaine.......................................................... 39
3.5.4 Heroin........................................................... 40
3.6 IllicitDrugLawsinAustralia .......................................... 40
3.6.1 ChroniclesofIllicitDrugLawChanges....................... 40
3.6.2 AttitudestoDrugUseandDrugLaws......................... 43
3.7 Summary ................................................................ 43
v
vi Contents
4 ModellingConsumptionofIndividualDrugs............................. 45
4.1 Introduction ............................................................. 45
4.2 EconomicandEconometricFramework............................... 46
4.3 LegalDrugConsumption............................................... 49
4.3.1 Alcohol.......................................................... 49
4.3.2 Beer,WineandSpirits.......................................... 55
4.3.3 Tobacco ......................................................... 60
4.4 IllegalDrugConsumption.............................................. 65
4.5 Summary ................................................................ 70
5 ModellingMultipleDrugUseUsingaMultivariateApproach......... 73
5.1 Introduction ............................................................. 73
5.2 TheMultivariateProbitModelforJointDrugParticipation.......... 74
5.3 Marijuana,Cocaine,Heroin,AmphetaminesandTobacco
(MCHAT)Consumption:AMultivariateApproach................... 77
5.3.1 MCHAT: Observed Joint, Conditional
andMarginalProbabilities ..................................... 78
5.3.2 MultivariateProbitEstimatesofMCHATConsumption ..... 78
5.3.3 MCHAT: Predicted Joint, Conditional
andMarginalProbabilities ..................................... 82
5.3.4 MCHAT: Marginal Effects on Joint
andConditionalProbabilities .................................. 82
5.4 Beer, Wine and Spirits (BWS) Consumption:
AMultivariateApproach ............................................... 90
5.4.1 BWS:ObservedJoint,ConditionalandMarginal
Probabilities..................................................... 91
5.4.2 MultivariateProbitEstimatesofBWSConsumption......... 92
5.4.3 BWS:PredictedJoint,ConditionalandMarginal
Probabilities..................................................... 93
5.4.4 BWS:MarginalEffectsonJointandConditional
Probabilities..................................................... 93
5.5 Summary ................................................................ 96
6 Modelling Alcohol Consumption by Levels Using
anOrderedGeneralisedExtremeValue(OGEV)Model................ 99
6.1 Introduction ............................................................. 99
6.2 TheOGEVModelforLevelsofAlcoholConsumption .............. 100
6.3 EstimationResults ...................................................... 102
6.4 ComparisonwithOPandMNLModels............................... 107
6.5 Summary ................................................................ 112
7 DrinkingPatternsandEarnings ........................................... 115
7.1 Introduction ............................................................. 115
7.2 AMultinomialSelectivityModelforEarnings........................ 117
7.3 ModelEstimatesandEarningsPredictions............................ 120
Contents vii
7.3.1 DiscussionofResults........................................... 121
7.3.2 ObservedandPredictedEarningsUnderVarious
ModelSpecifications ........................................... 126
7.4 EarningsDifferentials................................................... 127
7.4.1 Earnings Differentials of Non Bingers
andFrequentBingersvis-a-visAbstainers .................... 128
7.4.2 Earnings Differentials of Non Bingers
andAbstainersvis-a-visFrequentBingers .................... 128
7.5 Summary ................................................................ 130
8 Summary,PolicyImplicationsandFurtherResearch................... 133
8.1 SummaryofFindings................................................... 133
8.1.1 BingeDrinking ................................................. 134
8.1.2 WhoUsesWhatDrugsandHowMuch?
DoPricesMatter?............................................... 134
8.1.3 ExploringCross-DrugRelationshipsViaBoth
ObservableandUnobservableIndividualCharacteristics .... 137
8.1.4 AreFrequentDrinkersDifferentfromModerate
or Occasional Drinkers? Can Advanced
EconometricTechniquesEnhancetheAnalysis
ofDrugConsumption? ......................................... 138
8.1.5 IsThereAnyAssociationBetweenIndividuals’
DrinkingBehaviourandTheirEarnings? ..................... 139
8.2 PolicyImplications...................................................... 139
8.3 LimitationsandPotentialFutureResearch ............................ 141
A DefinitionofVariables....................................................... 143
B AppendixtoChap.3......................................................... 147
C AppendixtoChap.5......................................................... 149
D AppendixtoChap.7......................................................... 161
Bibliography...................................................................... 165
Chapter 1
Introduction
1.1 BackgroundandMotivation
The use of psychoactive drugs—licit and illicit—is associated with a range of
adverse effects on both physical and mental health. Such health consequences
range from short-term effects such as insomnia and abdominal pain to long-
term effects such as seizures, strokes, paranoia, liver cirrhosis and heart disease
(IHME 2013). Other than health effects, drug use is also associated with an
array of adverse consequences on the user, his family and the community at
large. Such consequencesinclude injuries or loss of life, family disruptions, poor
job performance, road accidents, violence, crime and suicide. To put this into
perspective, tobacco kills nearly 6 million people each year, including more than
600,000non-smokerswho die from exposure to tobacco smoke and up to half of
the world’s one billion smokers will eventually die of a tobacco-related disease.
Approximately2.3millionpeopleworldwidediedin2004,fromtheuseofalcohol.
Between153and300millionindividualsaged15–64hadusedillicitdrugsin2010,
out of which 15.5–38.6 million were problem drug users (UNODC 2012; WHO
2011a,b). Drug abuse imposes a high economic cost on society1 and has been a
major concern to policymakers worldwide. A range of strategies, campaigns and
rehabilitationprogramshavebeenundertakeninanumberofcountries,totreatand
prevent drug-related harms. Such harms (to the user and to society) range from
drug-related morbidity and mortality, motor vehicle fatalities, to violence, crime,
andsuicide.
In Australia, recreational drugs have a long-standing popularity despite the
government’scommitmentto discouragethe uptake and supply of harmfuldrugs.
Ithasoneofthehighestlevelsofalcoholconsumptionintheworld(WHO2011a).
Over the last two decades, the National Drug Strategy (a cooperative venture
1Economiccostofdrugabuserelatestoexternalcostsarisingfromlostproductivity,healthcare
expenditures,lawenforcementandcriminaljusticeexpenditures,etc.
P.R.Srivastava,RecreationalDrugConsumption,DevelopmentsinHealthEconomics 1
andPublicPolicy11,DOI10.1007/978-3-319-02405-9__1,
©SpringerInternationalPublishingSwitzerland2013
2 1 Introduction
between the Australian Commonwealth,State and Territory Governmentsand the
Non Government sector) has developed a wide range of strategies towards harm
reduction arising from drug consumption; produced and disseminated research
for policy development and public awareness; and conducted national surveys to
monitortheconsumptionofdrugs.In2004,nearlyhalfoftheAustralianpopulation,
aged 14 or older, consumed alcohol and about one fifth smoked tobacco at least
once weekly (NDSHS 2005a).More than 15% reportedthe use of illicit drugsin
thepastyear,andmorethanathirdhadusedthematsomestageintheirlife.While
marijuanaremainsthemostwidelyusedillicitdrug,mainlyduetolowprice(AIC
2013),syntheticdrugssuchasspeed,iceandecstasy,whichbelongtotheclassof
amphetamines,have becomeincreasinglypopularin the last decade, in particular,
amongyoungusers(Ransleyetal.2011).
Drug abuse results in significant social and economic costs to the Australian
society. In 2004–2005, drug misuse was estimated to cost Australians more than
AUD56 billion (around 8.6% of GDP), of which AUD48 billion was attributed
to licit drugsand AUD8 billion to illicit drugs(Collins and Lapsley 2008).These
costs relate to resources used to address crime, health care, accidents and loss of
potential productivity from disability, drug-attributed death and withdrawal from
the workforce. They also include intangible costs resulting from psychological
stressorlossoflife.Suchasignificantwasteofresources(resultingfromnegative
externalities) can only be minimised with a well-designed set of cost-effective
policiesandstrategies.Thus,fromapolicyperspective,itisveryimportanttohave
athoroughunderstandingofdrugusersandtheireconomicbehaviour.
The criminalstatus of illicitdrugsis a topicof heateddebateacrossthe world.
It is argued that drug prohibition imposes a heavy economic cost on society in
terms of legal and health care expenses when those resources could be released
to better protect society from more serious crimes. On the other hand, opponents
of drug decriminalisationor legalisation advocate that such policies only result in
an increased use of drugs without bringing any social benefits to society. A few
countries, or jurisdictionswithin some countries, have decriminalisedor legalised
theuseofdrugs.InAustralia,thedecriminalisationofmarijuanahasstirredalotof
controversy. South Australia was the first jurisdiction to implement an expiation
system for minor marijuana offences known as the Cannabis Expiation Notice
(CEN) system, in 1987. Under this scheme, simple marijuana offences such as
possessing, or cultivating small amounts for personal use are subject to minor
penalties although the sanctions for commercial dealings are rather significant.
Similar expiation systems have since been introduced in a few other Australian
states and territories and yet others have been gradually easing their laws against
marijuanaconsumptionin recent years. Given Australia’s fairly recentexperience
withdecriminalisation,thereisnotmuchempiricalevidenceinsupportofthepolicy
anditsintendedeffect.
Research on druguse andits consequenceshas arisenfromseveraldisciplines.
Drug users’ behaviour has been studied extensively in psychology,sociology and
medical arenas. In the last two decades economists have also showed growing
interest in the study of drug use and its consequences.They have broughtunique
