Gateway Theory in a Dynamic Context: The Effect of Past Substance Use on Current Demand

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Grider, William Burton
- Affiliation: College of Arts and Sciences, Department of Economics

Abstract

This study investigates the idea that prior consumption of one drug leads to current consumption of another - the so-called gateway theory. The research implements a discrete factor random effects model to jointly estimate current cigarette, alcohol, and marijuana consumption as a function of endogenous prior drug consumption behavior and current prices. The model controls for endogenous arrest incidence and sample attrition by modeling those events. I develop reduced form demand models for the consumption of the three drugs by a cohort of adolescents transitioning into young adulthood, and first estimate the model equations independently of one another, treating endogenous prior behavior as being exogenous. I then implement controls for unobservable heterogeneity, allowing errors to be correlated across the equations in a jointly estimated model that enables an analysis of the effects of changes in prior drug consumption and policy variables on consequent drug use. Results largely support the idea that drinking and tobacco smoking serve as gateways into marijuana consumption, but also indicate that controlling for unobservables weakens the estimated impact of prior drug use on current drug consumption. While the results support the idea that gateway effects exist, they also indicate that ignoring unobservable factors produces upwardly biased estimates of the magnitude of these effects.

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