Substance Consumption Among Youth: A Dynamic Analysis of Alcohol, Cigarette and Marijuana Use

I analyze the demand for alcoholic beverages, cigarettes, and marijuana using a structural dynamic model. Previous studies have used cross-sectional data to analyze the demand for various substances or longitudinal data to analyze the demand for individual substances such as cigarettes. I develop a model that details inter-temporal and contemporaneous relationships in the demand for these substances, and estimate the model using panel data from the National Longitudinal Survey of Youth, 1979. I contribute to the literature by explicitly modeling gateway effects and addiction in a dynamic, utility maximizing framework. The results obtained from the duration models suggest that unobserved heterogeneity and duration dependence are important in explaining substance use. The results from the structural model reveal that the impact of past consumption on substance use is large, that alcohol and cigarettes are contemporaneous gross substitutes, that cigarettes and marijuana are contemporaneous gross substitutes, and that alcohol and marijuana are contemporaneous complements. Policy simulations suggest that individuals react rationally to price changes and that alcohol use and cigarette smoking act as gateways to marijuana use.

Note: Abstract extracted from PDF text