Do Higher Cigarette Prices Encourage Youth to Use Marijuana?

Every major national tobacco legislation proposed in the past two years has called for significant increases in the price of cigarettes as a way to discourage youths from smoking. One argument used to oppose these bills is that increases in the price of cigarettes would cause youths to substitute marijuana for cigarettes. Although it has long been believed that cigarettes are a gateway drug,' no economic research has been done to determine whether cigarettes and marijuana are economic complements or substitutes. This paper begins to fill the void in the current research by examining the contemporaneous relationship between the demands for cigarettes and marijuana among a nationally representative sample of 8th, 10th and 12th graders from the 1992-1994 Monitoring the Future Project. Two part models are used to estimate reduced form demand equations. Examination of the cross-price effects clearly shows that higher cigarette prices will not increase marijuana use among youths. In addition to reducing youth smoking, we find that higher cigarette prices significantly reduce the average level of marijuana used by current users. Cigarette prices also have a negative effect on the probability of using marijuana findings are not significant at conventional levels