Research paperDrug decriminalization and the price of illicit drugs☆
Introduction
The United Nations Office on Drug and Crime (UNODC) estimates that in 2009 between 172 million and 250 million people used illicit drugs and between 18 million and 38 million were drug dependent, worldwide. In fact, drug use and dependence is a major threat to global health, representing one of the top ten risk factors in the developed countries. The risk of contracting infectious diseases such as HIV, AIDS, Hepatitis, and Tuberculosis is higher for drug users than for nonusers.
The relevance of the social and economic costs implied by drug use and dependence contributes to the current hot debate on drug policy in many countries such as the United Kingdom, Australia, and the United States. Policymakers and economists have been discussing a comprehensive response to drug use and trafficking for decades but the solution is far from being unanimous. Furthermore, policymakers have been reluctant to reform drug laws.
The alternative law enforcement schemes that have been at the center of the debate are the illicit drugs legalization, decriminalization, and depenalization. Those terms are often misused. According to the European Monitoring Centre for Drugs and Drug Addiction (EMCDDA), “decriminalization” comprises removal of a conduct or activity from the sphere of criminal law. Prohibition remains the rule, but sanctions for use (and its preparatory acts) no longer fall within the framework of the criminal law; “depenalization” means relation of the penal sanction provided for by the law. In the case of drugs, and cannabis in particular, depenalization generally signifies the elimination of custodial penalties.1 This means that under the decriminalization framework, drug use and possession are still illegal but infractions to these prohibitions are to be treated in a noncriminal framework rather than through the criminal justice system. In contrast, in the depenalization framework, imprisonment is no longer imposed for drug usage and possession even though these remain a criminal offense, as other criminal sanctions such as police record, probation, or fines are still available. In this paper legalization is defined as the amendment of law to eliminate any sanction, criminal or administrative, associated with the possession, use, or distribution of any controlled drugs.
In the late 1980s and 1990s a growing population of intravenous heroin users became a major threat to public health in Portugal, where rates of heroin users were among the highest in Europe. During this period, the number of HIV infections and drug related deaths rose dramatically. In the mid’90s Portugal engaged in an intensive debate on alternative enforcement policies to deal with drug use and, in 1998, a panel of leading scholars and medical professionals presented a report with recommendations rooted in understanding drug dependency as a disease rather than a crime, proposing prevention, treatment, and reintegration programs as an alternative to prison. The recommendations of this panel of experts led to the adoption of the National Strategy for the Fight Against Drugs (NSFAD) in 1999 and encompass a new legal framework with the end of criminal sanctions for drugs users, the enforcement of law to reduce drug production and trafficking, and the expansion of policies and resources for the reintegration of drug users and treatment.2
This process culminated with the approval of the law decriminalizing the personal use and possession of illicit drugs on July 1, 2001 (Law 30/2000).3 The new law applies to the use, possession, or acquisition of all drugs, including “hard” drugs, in quantities up to a ten day supply.4 This policy change was also intended to reduce demand by promoting a health-driven drug policy and eliminating the stigma related to the criminal prosecution of drug users. In the Portuguese decriminalization framework, police can no longer arrest drug users but must refer them to the local Commissions for the Dissuasion of Drug Use (Comissões para a Dissuasão da Toxicodependência) (CDT) that decide the administrative or public order sanction to apply.5 Severe criminal penalties are still applied to drug traffickers.
The discussion on the alternative legislative approaches to deal with the illicit drug economy presumes that drug decriminalization leads to an increase in the prevalence of drug use. However, the impact of the drug decriminalization policy on drug markets is not clear. Critics advocate that decriminalization leads to a perception of acceptability of illicit drug use and lowers costs of drug use as drug users face no criminal sanctions. In this case, if the supply side remains constant, meaning that traffickers and sellers face the same risks associated with drug trafficking, this would lead to higher prices.6 On the supply side, and to the extent that demand remains constant, an effective enforcement of the drug law with the objective of fighting production and sale of drugs would also lead prices to increase. In the Portuguese case, the NSFAD comprised both the end of criminal sanctions for drug use and increased resources to fight drug trafficking. Therefore, the impact of the drug decriminalization policy on the market equilibrium depends both on demand and supply effects.
In this paper we shed further light on the impact of drug decriminalization on the illicit drug market by studying its impact on the price of illicit drugs. A primary reason to focus on the impact of the policy change on the price of drugs is the presumed effect of prices on use and consumption. From an economic viewpoint, the study of prices may provide insights on the impact of the drug decriminalization policy as a market clearing equilibrium results from the combination of prices and quantities. In fact, availability and prices of illicit drugs are often pointed as the main determinants of drug consumption.
The fear of increased usage and dependence due to softer law enforcement has been a critical argument in the discussion, but these concerns are to a large extent speculative as no unambiguous empirical evidence on the impacts of decriminalization on drug markets can be found in the literature. The current paper examines the dynamics of the illicit drugs market, focusing on the supply side of the market. To evaluate the impact of the policy change on prices we follow two empirical research routes. The first, is a standard difference-in-differences analysis which accommodates the presence of observed and unobserved heterogeneity and time effects. The second approach is the application of the Synthetic Control Method, which has the advantage of providing a systematic way of constructing a comparison group that best resembles the characteristics of the treated unit.
The results suggest that (retail) prices of cocaine and opiates did not decrease following the drug decriminalization policy which is in contradiction with the commonly held belief that softer drug law enforcement necessarily leads to lower prices. Empirical evidence regarding the Portuguese case suggests that the demand effect did not materialize in the post-decriminalization period and, therefore, this failure of prices to decrease may be explained by the boost in resources available to fight drug trafficking.
This paper is organized as follows: the second section presents related literature. The third section describes the data and the empirical methodology and discusses the results. The final section provides the conclusions.
Section snippets
Related literature
The discussion of policy toward illicit drugs commonly uses the metaphor of markets to explain the dynamics of use. Even though prices play a crucial role in the metaphor they have been overlooked in the empirical analysis and data collection. In fact, prices constitute a prominent indicator for understanding the effects of a policy change such as drug decriminalization. The sharp decline of the retail prices of hard drugs like cocaine and heroin in the last 20 years (see [Costa Storti and De
Data description
We use a panel of 16 countries, including 15 European Union countries plus Norway, for the period between 1990 and 2010. We consider 2000 as the treatment year since, even though the decriminalization of use and possession of illicit drugs in Portugal entered into force on 1 July 2001, authorities started to apply the recommendations proposed by the National Strategy for the Fight Against Drugs before the legislative change. Therefore, we have 10 periods in the pre-treatment period and 11
Conclusions
The existing forms of drug liberalization have been hotly debated over the past years in several countries, especially in the United Kingdom. However, the public debate is couched mostly in speculation, due to the lack of empirical evidence on these matters.
In this study we recognize the importance of drug demand indicators but we focus our analysis on the supply side. To the best of our knowledge this is the first study that investigates the role of the drug decriminalization process in
References (29)
- et al.
The cocaine and heroin markets in the era of globalisation and drug reduction policies
International Journal of Drug Policy
(2009) - et al.
Globalization and the price decline of illicit drugs
International Journal of Drug Policy
(2009) Law enforcement, the price of cocaine and cocaine use
Mathematical Computer Modelling
(1993)- et al.
A social cost perspective in the wake of the Portuguese strategy for the fight against drugs
International Journal of Drug Policy
(2015) - et al.
The demand for cocaine by young adults: A rational addiction approach
Journal of Health Economics
(1998) - et al.
Synthetic control methods for comparative case studies: Estimating the effects of California's Tobacco Control Program
Journal of the American Statistical Association
(2010) - et al.
Comparative politics and the synthetic control method. MIT Political Science Research Paper No. 2011-25
(2012) - et al.
The economic costs of conflict: A case study of the Basque Country
American Economic Review
(2003) - et al.
Relatório Final do III Inquérito Nacional ao Consumo de Substâncias Psicoativas na Populaç ao Geral, Portugal 2012
(2013) - et al.
Prohibition and the market for illegal drugs: An overview of recent history
World Economics
(2001)
An empirical analysis of cigarette addiction
American Economic Review
A theory of rational addiction
Journal of Political Economy
Have we lost the war on drugs?
Wall Street Journal – The Saturday Essay
Estimating the elasticities and cross elasticities of demand for cocaine and heroin. Heinz School Working Paper 95-13
Cited by (22)
Diverting people who use drugs from the criminal justice system: A systematic review of police-based diversion measures
2022, International Journal of Drug PolicyCitation Excerpt :Since the introduction of a national agreement to offer diversion to minor drug offenders in 1999, the number of police-based diversion programs has significantly increased in Australia (Hughes & Ritter, 2008), The most common type of police diversion programs is “cannabis cautioning”, where minor cannabis offenders are diverted away from the criminal justice system into education or treatment programs (Shanahan et al., 2017). While several studies have found positive outcomes associated with initiatives such as LEAD and CDDAs (Collins et al., 2017, 2019; Félix et al., 2017; Félix & Portugal, 2017; Shanahan et al., 2017), concerns have also been expressed. First, these programs involve a coordinated collaboration between community partners and legal authorities, and it has been suggested that police officers may be reluctant to participate in activities seen as social work (Skogan & Hartnett, 1999; Worden & McLean, 2018).
Scheduling of new psychoactive substance the Swiss way: A review and critical analysis
2019, Science and JusticeCitation Excerpt :In aggravating circumstances imprisonment of one to ten years can apply [30]. The approach to prosecute vendors and dealers but not consumers, has been very successful in Portugal where the use of drugs is decriminalized since 2001 under the Law 30/2000 [41]. It was observed that the number of drug-related injuries, drug usage and the criminal justice burden and costs were reduced [42].
Self-control, differential association and the drug–crime link in Uruguay in the context of the legalization of Marijuana
2019, Aggression and Violent BehaviorCitation Excerpt :There is also some empirical evidence that alternative drug policies might be less harmful as usually is assumed by conservative perspectives. Recent studies have shown that countries such as Portugal or Czech Republic that have implemented drug decriminalization policies have not generated more harm through substantial decrease of price of illegal drugs, increases of drug use, or diminishing the age of onset of drug use (Červenýa, Chomynováb, Mravčíkb, & van Ours, 2017; Felix & Portugal, 2017). More interestingly, a recent natural experiment study in England showed that legal changes regarding decriminalization of drugs did not increase the use of drugs and youth crime (Braakmann & Jones, 2014).
Mental Health Needs, Substance Use, and Reincarceration: Population-Level Findings From a Released Prison Cohort
2024, Criminal Justice and BehaviorToleration by Victimized Coffeeshops in Amsterdam
2023, Crime and DelinquencyAnti-Doping Policy, Health, and Harm
2023, Sport, Ethics and Philosophy
- ☆
We are grateful to Ana Tavares for her help with the data and to two anonymous referees for their comments and suggestions. Financial support from Fundação para a Ciência e Tecnologia is acknowledged. The views expressed are those of the authors and do not involve the responsibility of the Banco de Portugal or the Eurosystem.