Do consumers substitute opium for hashish? An economic analysis of simultaneous cannabinoid and opiate consumption in a legal regime.

OBJECTIVE

To analyze interrelationships in the consumption of opiates and cannabinoids in a legal regime and, specifically, whether consumers of opiates and cannabinoids treat them as substitutes for each other.

METHODS

Econometric dynamic panel data models for opium consumption are estimated using the generalized method of moments (GMM). A unique dataset containing information about opiate (opium) consumption from the Punjab province of British India for the years 1907-1918 is analyzed (n=252) as a function of its own price, the prices of two forms of cannabis (the leaf (bhang), and the resin (charas, or hashish)), and wage income. Cross-price elasticities are examined to reveal substitution or complementarity between opium and cannabis.

RESULTS

Opium is a substitute for charas (or hashish), with a cross price elasticity (βˆ3) of 0.14 (p<0.05), but not for bhang (cannabis leaves; cross price elasticity=0.00, p>0.10). Opium consumption (βˆ1=0.47 to 0.49, p<0.01) shows properties of habit persistence consistent with addiction. The consumption of opium is slightly responsive (inelastic) to changes in its own price (βˆ2=-0.34 to -0.35, p<0.05 to 0.01) and consumer wages (βˆ1=0.15, p<0.05).

CONCLUSIONS

Opium and hashish, a form of cannabis, are substitutes. In addition, opium consumption displays properties of habit persistence and slight price and wage income responsiveness (inelasticity) consistent with an addictive substance.