Research on the Heroin Market
» Project Details
Methadone treatment for heroin addiction appears to be a cost-effective approach to decreasing heroin use in addicted
patients. What remains unclear is whether methadone treatment has beneficial effects beyond the individuals in treatment. For example, does the total number of heroin users decrease when some heroin users enter treatment, therefore leading to falls in crime rates and HIV transmission? Alternatively, does the entry of some heroin users into treatment lead to changes in the retail market for heroin such that new heroin users are recruited by drug dealers to take the place of their former clients, thus minimizing or eliminating any net benefit to society?
We will use econometric techniques to assess whether expansion of methadone treatment leads to a fall in the retail price of
heroin. Such a fall in price would lead to an increase in use of heroin among current users, and also lead to new users entering the heroin market. Once we assess whether or not the price of heroin falls, we can estimate to what degree this change in the market offsets the societal gains achieved through methadone treatment.
We will draw on four data sources containing information in multiple US cities from 1988-1995 on heroin prices, heroin use
by both patients in emergency rooms and by arrestees, and methadone distribution to treatment centers. We have already
assembled a dataset containing the first three sources. We require funding to support the collection of the methadone
distribution data from the Drug Enforcement Administration.
Using simultaneous equations models for the supply of heroin and the demand for heroin in these cities from 1988-1995, we
will estimate to what degree the price of heroin falls when methadone treatment is expanded.
We hope to put forth our findings to researchers who perform cost-effectiveness analysis of drug treatment, and to policy
makers who develop and implement plans that are intended to decrease both the amount of drug use in the US and the
complications from drug use experienced both by drug users and by the society in general.