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Measuring the Market Size for Cannabis: A New Approach Using Forensic Economics

Parey, Matthias and Rasul, Imran 'Measuring the Market Size for Cannabis: A New Approach Using Forensic Economics.'

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Abstract

Quantifying the market size for cannabis is important given vigorous policy debates about how to intervene in this market. We develop a new approach to measuring the size of the cannabis market using forensic economics. The key insight is that cannabis consumption often requires the use of complementary legal inputs: roll-your-own tobacco and rolling papers. The forensic approach specifies how legal and illegal inputs are combined in the production of hand-rolled cigarettes and cannabis joints. These input relationships, along with market adding-up conditions, can then be used to infer the size of the cannabis market. We prove proof-of-concept that this approach can be readily calibrated using: (i) point-of-sales data on the legal inputs of roll-your-own tobacco and rolling papers; (ii) input parameter estimates drawn from a wide-ranging interdisciplinary evidence base. We then implement the approach using data from 2008-9. For those years, the forensic estimates for the UK cannabis market are near double those derived from standard demand-side approaches. We make precise what drives the measurement gap between methods by establishing: (i) the parameter adjustments needed in demand-side approaches to match the forensic measure; (ii) the changes in methodology to the forensic approach needed to match the demand-side estimate. Our analysis develops an agenda on measurement and data collection that allows for credible cost-benefit analysis of policy interventions in illicit drug markets.

Item Type: Article
Uncontrolled Keywords: C80, K42
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HA Statistics
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Matthias Parey
Date Deposited: 18 Jul 2017 09:25
Last Modified: 14 Nov 2018 15:15
URI: http://repository.essex.ac.uk/id/eprint/20093

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