Marijuana Decriminalization and Substitution Effects

"In conclusion, our results suggest that participation in the use of both licit and illicit drugs is price sensitive. Participation is sensitive to own prices and the price of the other drugs. In
particular, we conclude that cannabis and cigarettes are complements, and there is some evidence to suggest that cannabis and alcohol are
substitutes, although decriminalization of cannabis corresponds with higher alcohol use. Alcohol and cigarettes are found to be complements.
"The results also show that the liberalized legal status of cannabis in South Australia coincides with higher cannabis participation on average over the period under investigation. In South Australia, where possession of small amounts of cannabis is no longer a criminal offence, the probability of use is estimated to be 2.0 percentage points higher than elsewhere based on the pooled sample of data. Further investigation revealed that although participation increased in South Australia shortly after the liberalization of the cannabis laws, the effect of decriminalization was transitory and had disappeared in seven years. In addition, our results indicate that the increase in participation was due to individuals over 30 delaying giving up cannabis use as a result of its changed legal status, not an increase in use
by younger people. This finding provides an explanation of why US studies based on youth fail to find that decriminalization has an impact on
the probability of cannabis use, while studies based on adults and youth, or just adults, do find a positive association between decriminalization and participation in cannabis use."


Cameron, Lisa & Williams, Jenny, "Cannabis, Alcohol and Cigarettes: Substitutes or Complements?" The Economic Record (Hawthorn, Victoria, Australia: The Economic Society of Australia, March 2001), p. 32.