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MENTAL ILLNESS AND THE DEMAND FOR ALCOHOL, COCAINE, AND CIGARETTES

Authors

  • Henry Saffer,

    1. Saffer: Research Associate, National Bureau of Economic Research, 365 Fifth Ave., Suite 5318, New York, NY 10016-4309, and Professor, Kean University, Union, NJ 07083. Phone 1-212-817-7956, Fax 1-212-817-1597, E-mail hsaffer@gc.cuny.edu
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  • Dhaval Dave

    1. Saffer: Research Associate, National Bureau of Economic Research, 365 Fifth Ave., Suite 5318, New York, NY 10016-4309, and Professor, Kean University, Union, NJ 07083. Phone 1-212-817-7956, Fax 1-212-817-1597, E-mail hsaffer@gc.cuny.edu
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    • *

      We thank Michael French, Jenny Williams, Theodore Joyce, Michael Grossman, and the session participants at the International Atlantic Economic Conference 2001 and the Western Economic Association Conference 2001 for helpful comments. This project was supported by a grant from the National Institute of Mental Health to the National Bureau of Economic Research.


Abstract

This article estimates the effect of mental illness on demand for addictive substances, allowing for structural endogeneity and simultaneity between mental illness and addictive consumption. Results show that individuals with a history of mental illness are 26% more likely to consume alcohol, 66% more likely to consume cocaine, and 89% more likely to consume cigarettes. This high-participation group is also price-responsive, although their price elasticities differ somewhat from those without mental illness. The results provide added justification for higher taxes and supply reduction activities. Furthermore, subsidizing the treatment of mental illness can reduce addictive consumption.(JEL I1)

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