Demand for Marijuana, Alcohol and Tobacco: Participation, Levels of Consumption, and Cross-Equation Correlations

Abstract

We investigated marijuana, alcohol and tobacco consumption using micro-unit data from the Australian National Drug Strategy Household Surveys. We estimated a multivariate probit (MVP) model to allow for correlations across participations of different drugs and a sequential model to study separately the determinants of participation and the levels of consumption. The MVP results indicate significant and positive correlations across all three drugs through unobservable charac- teristics, with the correlation coefficient between marijuana and tobacco being the highest. The MVP approach allows for better prediction of conditional and joint probabilities, providing valuable information for policy makers in a multidrug framework.