NCJ Number
191193
Journal
Journal of Political Economy Volume: 105 Issue: 2 Dated: 1995 Pages: 261-279
Date Published
1995
Length
19 pages
Annotation
This study examines drug abuse, opium use, Dutch involvement in the opium trade, and the Dutch government’s drug control policies and presents the results of a quantitative analysis of the price elasticities of opium in the Dutch East Indies during 1923-38.
Abstract
The Dutch government controlled the opium market in the Dutch East Indies, which is now Indonesia, for several decades in the beginning of the 20th century. Data gathered during this opiumregie formed the basis of an analysis of the price elasticities of demand for opium for different groups of consumers. Results revealed no big difference between short-term and long-term price effects. Short-term price elasticities of opium consumption were about minus 0.7; long-term price elasticities were about minus 1.0. Apparently, opium was not very addictive. The estimated income elasticities were large as well. The short-term income elasticity was about 0.8; the long-term elasticity was about 1.3. The analysis concluded that the estimated price elasticities of the demand for opium were not small. Findings suggested that if the same conclusion applied to drug consumption today, low prices induced by drug legalization would stimulate drug demand by increasing both the number of users and the quantity per user. However, firm conclusions were not possible due to the need to consider the effects of a change from prohibition to market intervention instead of a change from market freedom to market intervention. Figures, tables, and 15 references (Author abstract modified)