Substitution and Complementarity in the Consumption of Alcohol, Cannabis, and Opiates in a Legal Regime: Insights from Historical Data

Aim: Understanding the behavior of populations of drug consumers has been and remains a topic of keen interest. We analyze a number of questions of contemporary interest. The first is whether consumers treat alcohol, cannabis, and opiates as substitutes or complements in a legal regime. Second, we explore evidence of habit formation consistent with addiction and the responsiveness of consumption to changes in prices of these substances.

Methods: Using data on twenty-five districts from Bengal, India, from 1911 to 1925, we model the consumption of alcohol, bhang (cannabis leaf), ganja (cannabis bud), and opium as functions of past consumption, their own prices, prices of the other substances, and wages using dynamic panel data methods.

Results: We find evidence (i) of habit formation for all of these substances; (ii) that alcohol is a substitute for cannabis bud and a complement for cannabis leaf and opium; (iii) cannabis leaf is a complement for alcohol and a substitute for cannabis bud, but neither cannabis bud nor opium consumption are associated with changes in the prices of other substances; (iv) changes in the consumption of alcohol, opium, and cannabis leaf are associated with changes in their own prices; and (v) alcohol, cannabis bud, and opium consumption are associated with changes in wages.

Conclusions: Alcohol consumption is interrelated with the consumption of all three other substances. Three of the drugs display either price or wage associations. Understanding how the consumption patterns of these substances are associated with economic variables informed harm reduction strategies in the early 20th century and should continue to do so.

Real Price and Per Capita Consumption of Alcohol, Opium, Cannabis Bud, and Cannabis Leaf
Real Price and Per Capita Consumption of Alcohol, Opium, Cannabis Bud, and Cannabis Leaf