Drug Decriminalization and the Price of Illicit Drugs

29 Pages Posted: 21 Feb 2015

See all articles by Sónia Félix

Sónia Félix

New University of Lisbon - Nova School of Business and Economics

Pedro Portugal

Bank of Portugal - Research Department; New University of Lisbon; IZA Institute of Labor Economics

Abstract

This study is an empirical assessment of the impact of the drug decriminalization policy followed by Portugal in July, 2001. We investigate especially the impact of the policy change on the price of illicit drugs. The analysis is performed using a difference-in-differences approach and a comprehensive set of countries as control group. We also investigate the application of Synthetic Control Method in order to construct a synthetic control unit from a convex combination of other countries. The results suggest that the prices of opiates and cocaine in the post-treatment period did not decrease in the sequence of the policy change. This result contrasts with the argument that softer drug law enforcement necessarily leads to lower prices and, consequently, to higher drug usage rates and dependence.

Keywords: illicit drugs, drug decriminalization policy, drug prices, treatment effects

JEL Classification: C21, D04

Suggested Citation

Félix, Sónia and Portugal, Pedro, Drug Decriminalization and the Price of Illicit Drugs. IZA Discussion Paper No. 8848. Available at SSRN: https://ssrn.com/abstract=2568044

Sónia Félix (Contact Author)

New University of Lisbon - Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

Pedro Portugal

Bank of Portugal - Research Department ( email )

Av. Almirante Reis 71, 6th
Lisbon 1150-012
Portugal
+351 21 313 0000 (Phone)
+351 21 814 3841 (Fax)

New University of Lisbon

Lisbon, 1099-085
Portugal

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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