A 'demand side' estimate of the dollar value of the cannabis black market in New Zealand

Most recent, modal, or median heroin purchase: Does it matter when estimating market size?

BACKGROUND

Assessing the size of illicit drug markets is an important activity of many government agencies; however, the expenditure-based method for estimating market size relies on the relatively untested assumption that the cash value of the most recent purchase is representative of the average purchase amount. Using panel data, we test the representativeness of the most recent, modal and median purchase compared to the average purchase amount.

METHODS

Data were drawn from a prior study that collected daily transaction-level purchase data from a sample of 120 people who were using heroin regularly. The same study participants completed two distinct two-week waves of data collection, separated by six months. T-tests and bootstrapping were used to detect differences within each wave between the average cash value of participant heroin purchases and the cash value of their most recent, modal and median heroin purchases.

RESULTS

In both waves, we found (a) no evidence that the expected value of the most recent purchase differs from the expected value of the average purchase, and (b) the expected values of the modal and median purchases are smaller than the expected value of the average purchase. These results imply that estimates of total market size based on the modal or median purchase will suffer from a significant downward bias, but that estimates based on the most recent purchase will be unbiased.

CONCLUSIONS

We provide evidence in support of using the most recent (but not the modal or the median) purchase to estimate market size for heroin.

Determinants of the retail price of illegal drugs in New Zealand

INTRODUCTION

New Zealand has a number of unusual geographical features that may influence the price of illegal drugs including international isolation, numerous rural communities, and two separate islands (North and South Islands).

AIMS

(1) Collect data on the prices of different drug types from all regions of New Zealand; (2) Identify independent predictors of the reported prices.

METHOD

An online drug survey was promoted via a targeted Facebook™ campaign. A total of 6331 respondents completed the survey. Normal regression models were constructed to identify predictors of the reported price of an ounce of cannabis, gram of methamphetamine, pill of ecstasy and tab of LSD using demographics, drug use frequency, drug market indicators, region, community size, type of seller, and location of purchase as predictor variables.

RESULTS

Higher availability was a predicator of lower prices for cannabis (-3% per higher availability category), methamphetamine (-4%) and ecstasy (-5%). Those living in the North Island (-26%) and buying from gangs (-5%) paid lower prices for methamphetamine. Those living in rural communities reported higher prices for methamphetamine (+5%) but lower prices for cannabis (-3%). Daily cannabis users (+4%) and those on social welfare (+2%) paid higher prices for cannabis.

CONCLUSION

Lower prices for methamphetamine in the North Island may reflect the concentration of methamphetamine manufacture there. The fact that gangs offer lower prices for methamphetamine suggests they do not have monopoly control of this market. Gangs may be able to offer lower prices for methamphetamine due to scale of production/trafficking and lower risk of victimisation. Higher prices for methamphetamine in rural areas may reflect less competitive markets. Lower prices for cannabis in rural communities may be due to proximity to growing locations. Daily cannabis users and those on social welfare may be less able to delay their cannabis purchases to low price harvest months.

Organized Crime in Cannabis Cultivation in New Zealand: An Economic Analysis

This paper draws on the emerging economic theory of organized crime to investigate the role organized criminal gangs play in outdoor illicit cannabis cultivation in New Zealand. Organized criminal groups are most likely to control illicit markets where there are cost advantages from larger-scale production, the need for specialized skills, capital equipment or large amounts of startup capital, and visible targets for violence aimed at discouraging competition. Examination of the illicit production of cannabis suggests the productivity gains that could be achieved from larger-scale cannabis cultivation are undermined by the difficulties of monitoring crops, the vulnerability of crops to ground and aerial detection, and legal penalties based on size of crop. The effectiveness of violence in discouraging competition in cannabis cultivation is constrained by the difficulties of identifying rival cultivators and discovering the location of rivals’ cannabis plots. Several reasons are put forward to explain why the New Zealand police nevertheless claim that cannabis cultivation in New Zealand is controlled by gangs.

Small Scale Domestic Cannabis Cultivation: An Anonymous Web Survey among 659 Cannabis Cultivators in Belgium

The shift to (inter)regional production, trade, and domestic cultivation has become an irreversible international trend. Until now, the focus of most empirical work has been on large-scale, commercially-oriented and professionally-organized segments of the cannabis industry, often based on police data and on the perspective of law enforcement agencies. This article presents some significant findings from a large-scale study on a less visible and less studied segment of the market, i.e. small-scale cultivators, based on an anonymous web survey among 659 cannabis cultivators. The article discusses the patterns of cultivation, some technical aspects of growing operations, (dis)advantages of cannabis cultivation, and perceived quality and strength of homegrown cannabis. The author argues that small-scale or amateur home growers constitute a significant segment of the cannabis market, both in a quantitative and in a qualitative perspective, and points to important differences between this sample obtained online and those obtained through traditional methods in other studies.

Estimating the dollar value of the illicit market for cannabis in New Zealand

New data collected on the procurement and purchase of cannabis in the 2001 New Zealand National Drug Survey are used to estimate the dollar value of the illicit market for cannabis as well conduct other economic analyses of the illicit purchase of cannabis in New Zealand. Eighty-four per cent of last-year cannabis users received at least some of their cannabis 'free', 38% 'bought' at least some of their cannabis, while only 8% grew any of their supply. By proportion of the total dollar value of the cannabis market, sales of 'tinnies' (1.5 g) had the biggest share of the market (30%), followed closely by 50 NZ dollars bags (4 g) (29%) and ounces (28 g) (26%). The average price paid per gram of cannabis fell steadily from 20.50 NZ dollars per gram for a joint to 5.63 per gram for a pound (NZ dollars). The distribution of spending on cannabis was positively skewed (average 1313 NZ dollars, median 400 NZ dollars, mode 100, range 5 - 55,200, interquartile range 100 - 1200) (NZ dollars). The bottom 50% of cannabis buyers spent a median amount on cannabis of 100 NZ dollars a year while the top 5% spent a median amount of 7425 a year (NZ dollars). The dollar value of the illicit cannabis market was estimated to be 190 million (131 - 249 million) (NZ dollars). Three limitations are acknowledged with the market estimate calculated: (i) the truncated age range of the survey data (13 - 45 years); (ii) the likely underestimation of heavy cannabis use in household drug surveys; (iii) a degree of 'double-counting' when the same cannabis is bought and sold a number of times.

Individual dollar expenditure and earnings from cannabis in the New Zealand population

INTRODUCTION

: High spending on illegal drug use can potentially provide insight into a range of drug related harm such as poor health, financial hardship, loss of opportunity, family neglect and income generating crime. Assessing the impact of high spending on drug use is complicated by the fact that many heavy drug users support their high expenditure on drug use through selling drugs. The aim of this paper is to estimate individual dollar expenditure and dollar earnings from cannabis in New Zealand.

METHODS

: As part of the 2003 New Zealand national household drug survey, detailed data were collected on cannabis use and purchasing in the previous 12 months. Those who had purchased cannabis in the previous year were divided into two groups for further analysis: 'cannabis buyers' (i.e. those who only purchased sufficient cannabis for their own personal consumption needs); and 'cannabis dealers' (i.e. those who purchased large surpluses of cannabis for re-sale on to others).

RESULTS

: Seventy-two percent of those who had purchased cannabis in the previous year were 'cannabis buyers' only. Cannabis buyers spent a mean of $817 (NZD) each on cannabis in the previous year (median $120). Cannabis dealers spent a mean of $5988 each on cannabis in the preceding year (median $1250). Once we accounted for projected earnings from selling surplus cannabis, half of the cannabis dealers achieved a mean net annual financial gain of $2739, and the remaining half were left with a mean net annual financial loss of only $350 over a year. Overall, 81% of all those who had purchased cannabis in the previous year had spent less than 5% of their gross annual personal income on cannabis, with 14% of these making a net financial gain. The proportion of income spent on cannabis was highest among those in the two lowest income earning groups, where approximately 8% spent 20% or more of their income on cannabis. Both cannabis buyers and cannabis dealers spending 10% or more of their income on cannabis were four times more likely to be unemployed than the wider population.

CONCLUSIONS

: For the vast majority of those who had purchased cannabis in the previous year, spending on cannabis had only a small impact on their total annual income levels. High spending on cannabis can potentially be substantially offset by earnings from selling surplus cannabis. High spending on cannabis had its greatest impact among low income earning groups where approximately one in 13 low income cannabis spenders were spending high proportions of their income on cannabis. There appeared to be some relationship between high cannabis spending and unemployment and this warrants further investigation.