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

Understanding the behavior of populations of drug consumers has been and remains a topic of keen interest. Using a unique dataset on twenty-five districts from Bengal, India, from 1911 to 1925, we analyze whether consumers treat alcohol, cannabis, and opiates as substitutes or complements in a legal regime. We also explore evidence of habit formation consistent with addiction and the responsiveness of consumption to changes in the prices of these substances. Consistent with the literature, we find evidence of habit formation for all these substances. We find that alcohol is a substitute for cannabis bud and a complement for cannabis leaf and opium; cannabis leaf is a complement for alcohol and a substitute for cannabis bud, but neither cannabis bud nor opium consumption is associated with changes in the prices of other substances. Finally, we find that changes in the consumption of alcohol, opium, and cannabis leaf are associated with changes in their prices; alcohol, cannabis bud, and opium consumption are associated with changes in wages. Understanding how the consumption patterns of these substances are associated with economic variables can inform harm reduction strategies.