Adolescent alcohol and marijuana consumption

This research analyzes the contemporaneous and intertemporal relationship between the demands for alcohol and marijuana by youths and young adults. A general theory of multi-commodity habit formation is developed and tested using data from the 1983-1984 waves of the National Longitudinal Survey of Youth. An Adjusted Tobit specification is employed for estimating the empirical model. Habit persistence is distinguished from unobserved heterogeneity through a reduced form instrumental variable technique. The results show that higher beer prices significantly reduce the demand for both alcohol and marijuana, indicating a contemporaneous complementarity between these two substances even after controlling for commodity-specific habit formation. Further, prior use of alcohol and cigarettes significantly increases the likelihood of currently using marijuana, providing evidence in support of the gateway hypothesis.